ANNUAL 2018 REPORT ALWAYS BY YOUR SIDE. - Polygon Group · Polygon employees form the right team to...

ANNUAL REPORT2018

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Polygon in brief 2Highlights from 2018 3CEO message 4Market and customers 7Mission and values 11Strategy 12Business approach 18Measure for progress 20Offering 23 Water 24 Fire 27 Climate 30Centres of excellence 34Countries and regions 36Our responsibility 38 Social 40 Environmental 44 Economic 46 Key figures 47Risk and risk management 48Country presidents 50

FIREWATER CLIMATE

OUR MISSION

Everyone who owns a property wants to avoid damage caused by fire, water or humidity. To prevent and control is a good start. But sometimes damage still occurs. And when it does – fast and efficient mitigation is a must. This is why Polygon exists. We prevent, control and mitigate. And our customers know that we are always by their side.

Driving transformation in property damage controlPolygon is a major worldwide player in property damage control, providing solutions to prevent, control and mitigate all kinds of property damage. The basis for our success is our 4,000 committed employees, guided by a strong corporate culture. We see ourselves as the new generation of Property Damage Control specialists – determined to drive industry transformation.

POLYGON IN BRIEF

SUMMARY FINANCIAL YEAR 2018

EUR m 2018 2017Sales 619.3 512.4Sales growth, % 20.8 6.9EBITDA 45.3 40.1EBITDA, % 7.3 7.8Adjusted EBITDA 53.0 43.0Adjusted EBITDA, % 8.6 8.4EBITA 31.9 30.1EBITA, % 5.2 5.9Adjusted EBITA 39.6 33.0Adjusted EBITA, % 6.4 6.4Cash flow from operating activities 31.2 40.7Net debt 180.6 141.9Full-time employees 3,810 3,279

2017 figures have been restated for implementation of IFRS 15 Revenue from Contracts with Customers. Figures for assignments, depots, employees and sales are approximate.

300,000YEARLY ASSIGNMENTS

4,000EMPLOYEES

619MILLION EUR SALES

24/7SERVICE

3CONTINENTS

60+YEARS’ EXPERIENCE

13COUNTRIES

300DEPOTS

SALES AND GROWTH

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POLYGON 20182

HIGHLIGHTS FROM 2018

• Polygon’s growth during 2018 was fuelled by a high rate of acquisitions, proving our ability to execute our strategic Buy and Build agenda. Read more about our acquisitions on page 15.

• Polygon was awarded Platinium status by Investors in People (IIP), for being an appreciated employer and workplace, and also for our engagement in sustainability work.

• Refinancing via placement of bond of EUR 210 Millions.

• Polygon in Norway and colleagues from Polygonvatro Germany conducted a successful clean-up and restoration after a fire at Gardemoen airport.

• Two new franchisees were added in Canada.

• After a large fire at an industrial complex, Polygonvatro Germany and Polygon Denmark demonstrated superior cross- border teamwork.

• Polygon UK and Ireland was awarded the highest status in Achilles, a highly regarded supply chain audit standard focused on risk, sustainability and business performance.

• Polygon UK and Ireland was named as a global leader in people management practice, having been shortlisted in the Platinum Employer of the Year 250+ category in the Investors in People Awards 2018.

• The Spark App, which rationalises communication in the property management sector, was launched in Sweden.

• Axel Gränitz was appointed as CEO of Polygon Group.

• Polygon Netherlands became the country’s first climate neutral restoration company.

• The annual employee surveys showed steady improve-ments and employee satisfaction.

Photo: The Wind Energy service area was introduced in Germany in 2017 and has continued to develop very strongly.

A STRONG YEAR FOCUSED ON GROWTH

During 2018, Polygon continued to demonstrate the strengths of our strategy and our sustainable business model. Our financial performance was excellent, and growth exceeded 20 percent. In fact, we have out-stripped the market for several years in a row when it comes to growth. This means that our customers continuously entrust us with an increasing portion of their damages.

In recent years, we have meticulously executed on our four-step strategic journey. After having worked intensively with Structure & Culture and getting the right organisation in place, we went into a period of hard work to further optimise Quality & Consistency in our service delivery during 2016 and 2017. These two steps represent the creation of a solid com-pany foundation.

The next two steps – Segments & Solutions and Buy & Build – are all about growth. That’s what we have been focus on during 2018. At the end of 2017, we started to concen-trate on the Segments & Solutions phase, which meant entering new customer segments and developing new solu-tions to even better respond to customer needs. This focus has continued during 2018. The achievements are several, and two examples are increased business within the cross-border Major & Complex Claims area and the release of the Spark app, which provides information and improves communication between residents and property managers.

The fourth and final step, Buy & Build, is all about capital-ising on our size and capacity in the fragmented market, through acquisitions of smaller and mid-sized damage res-toration companies. In line with the Buy & Build strategy, we have successfully realised more than ten acquisitions during 2018, including Neways Property Care in the UK, Caliber Sanering and Refix Skadesanering in Sweden, and Dansk Bygningskontrol in Denmark. We see ourselves in a position to use our know-how in Buy & Build and implementation to expand our activities to other countries in the future. In January 2019, we delivered on this ambition when we signed an agreement with a leading Swiss company to enter a new country for Polygon. Alvisa 24 is specialised in Fire Damage Restoration and Major & Complex Claims and adds 67 employees and sales of EUR 11 million.

With each acquisition, we work through the foundation, implementing the Polygon structure and culture. For this reason, we held Polygon Academy training specifically for newly acquired companies. The training, which was originally launched in 2016, introduces management to the Polygon Model, shares best practices and provides inspiration to become a true part of our Group philosophy.

CONTINUED FAVOURABLE MARKET TRENDSInsurance companies continue to drive the market in favour of large service providers like Polygon. Digital tools, a high level of professionalism, project management skills, a one-stop-shop service, and capacity of scale and reach are quali-fications that favour Polygon. We are the undisputed market leader in Europe with a market share of approximately 10 percent, with the number two being only half our size. Our geographical footprint, national coverage, complete service range and financial power continue to be noticeable benefits.

POLYGON 20184

ACQUISITIONS

Denmark The acquisition of Dansk Bygningskontrol was com-pleted and takes Polygon closer to market leadership in Denmark. The acquisition added 230 employees and annual sales of EUR 29 million.

GermanyVon der Lieck, a well-established company in western Germany, was acquired and added 25 employees and annual sales of EUR 4 million. The company offers both drying and leak detection services.

Norway Minority shares in four franchisees were acquired, with call options for 100 percent ownership. In July, two of the call options were used and the franchisees in Drammen and Kongsberg became 100 percent owned subsidiaries.

SwedenWith the acquisition of Caliber Sanering, adding 11 employees and sales of EUR 1.8 million, Polygon expanded into fire damage restoration in Sweden, meeting the growing demand for one-stop shopping. The fire service line was also strengthened via the acquisition of Refix Skadesanering, adding 30 perma-nent employees and annual sales of EUR 3.2 million. The acquisition of Stockholm-based Metodia added expertise in moisture measurement and safety, and strengthened the position in the construction customer segment in Stockholm.

UK Neways Property Care was acquired, enabling Polygon to offer a full service of property damage repair and restoration in the country. The acquisition added 54 employees and annual sales of EUR 6.1 million.

Group As a way to strengthen the digital offering with new Internet-of-Things solutions for property damage prevention, control and mitigation, minority shares of Caption Data were acquired.

I have worked in the professional services sector for many years, and my firm belief is that the quality of the services is all about the people. Since my start in 2018, I learned that Polygon has the best possible position in this area. We have great people on board – people who know how to respond to a customer, who are empathetic, who excel in profession-alism and who work in line with the Polygon model from A to Z. I want to assure and safeguard this strength since it is absolutely crucial for the growth phase we have now entered.

Polygon will continue to lead industry transformation through digitalisation initiatives and consolidation of the fragmented market. The company is in great shape for further advancing the damage restoration industry, and the Polygon employees form the right team to lead the way forward for Polygon.

Thank you,

Stockholm in February 2019

Axel GränitzCEO & President Polygon Group

POLYGON 2018 5

CEO MESSAGE

CAREFULLY SELECTED ACQUISITIONS INCREASE POLYGON’S GLOBAL FOOTPRINT To grow by acquisitions (Buy & Build) is the last step in Polygon’s strategic four-step agenda, and a necessity in order to approach the long-term target of being number 1 or 2 in each country of operation.

This strategy is about capitalising on our size and capacity by acquiring carefully selected companies within our industry. Our position in each individual market determines which type of acquisition may be relevant.

In 2018, for example, we acquired Neways Property Care in the UK in order to be able to develop a one-stop shop for our customers. This acquisition enables insurers to benefit from a fully joined up, in-house restoration model, shortening claims, eliminating costs and im -proving the customer claim journey. In Sweden, the acquisition of Caliber Sanering and Refix Skadesanering meant service line expansion into fire damage restoration, supporting the ambition to develop national fire damage restoration services.

With each acquisition, we work through the foundation, implementing the Polygon structure and culture.

2018 was a very productive Buy & Build year as we successfully acquired companies in six countries – Denmark, Germany, Norway, Sweden and the UK. In addition, we entered a new market early 2019, when we acquired Alvisa 24 in Switzerland.

POLYGON 20186

FAVOURABLE MARKET DYNAMICS

The damage control industry is fragmented but undergoing professionalisation and consolidation. Driving forces are industry transfor-mation via digitalisation, supply chain centralisation, intensified sustainabil-ity focus and an increasing number of extreme weather events. Scale and resources are becoming increasingly important. For Polygon, the market dynamics are very favourable.

Polygon operates in a low-cyclical market, with stable demand for must-have services. Damage needs to be repaired, the faster the better. In general terms, there is stable and low- cyclical demand for Property Damage Control services, driven by insurance claims. These are basically resilient to downturns in the general economy.

The European property damage restoration market is estimated to be worth around EUR 5 billion and has been growing by 1–3 percent per year. The total number of restor-able residential and commercial properties continues to increase, as does the average value of these properties, which in turn results in more claims for damages.

A FRAGMENTED MARKET UNDERGOING RAPID CHANGEThe property damage control industry is highly fragmented, but is undergoing professionalisation, with Polygon as one of the frontrunners. As the market is consolidated, barriers to entry are also raised.

Polygon’s ambition is to be the number 1 or number 2 operator in each country where we are active. In Europe, for example, we are the undisputed market leader, but our overall market share is still only around 10 percent. There is only one other player that can claim to be European, and Polygon is more than twice as big as this competitor on this continent. This means that there is great potential for growth, both organically and via acquisitions – and Polygon is in the position to drive consolidation in the business. Around 80 percent of all property restoration jobs in Europe are assigned to small local companies that cover only a limited geographical area.

MARKET AND CUSTOMERS

STREAMLINING DAMAGE CONTROL

CUSTOMER EXPERIENCE

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FUTURE

PRESENT

There are around 1,000 small regional and local competitors to Polygon. These companies are typically not awarded framework contracts with large insurance companies.

INDUSTRY COOPERATION DRIVES PROFESSIONALISATIONWe are driving hard to make our industry more mature and professional. To achieve this, we cooperate with industry associations and partners. We strive to develop quality stan-dards, ethical business practices, environmental initiatives and better conditions for everyone working in our business.

SIZE AND CAPACITY ARE DECISIVE Around 95 percent of Polygon’s business is related to pre-dictable damage following a seasonal pattern. This includes water leaks and fires that are not related to weather. The remaining 5 percent is driven by more extreme events, such as storms and floods.

These are, of course, less foreseeable and can be volatile within a country or a region during a specific period. For the last 35 years, the number of major weather events has con-stantly been increasing. As a consequence of climate change, this trend is likely to continue. For example, the 2018 Atlantic hurricane season started earlier than usual and had unusually many simultaneous hurricanes. For Polygon’s operations in the US, the storms Florence and Michael led to several unforeseen assignments during the autumn.

The frequency of property damage can vary depending on circumstances beyond Polygon’s control, the outdoor temperature and the weather. It follows that scale and resources are important and decisive. Polygon stands strong in this perspective since we are a big, flexible cross-border player with a large stock of dehumidifiers, fans, heaters and other types of equipment under one roof at our Eurostock in the Netherlands.

INCREASED DEMAND FOR PROFESSIONAL ONE-STOP-SHOPInsurance companies prefer suppliers with flexible capacity that can manage the entire damage restoration process. The demand is ever-increasing in the areas of digital capabilities, increased professionalism, project management skills, prefer-ence for one-stop shops and the centralisation of procure-ment. As they are increasingly focusing on fewer suppliers and more framework agreements, this is another trend that favours large service providers such as Polygon.

DIGITALISATION PLAYS A KEY ROLEDigitalisation is a strategic priority for boosting our internal efficiency and employee satisfaction. It is no longer mainly a means for cost cutting, and digital solutions now help us excel in our daily work, improve customer interactions, increase internal communication, facilitate acquisitions and integration processes, and much more.

POLYGON 20188


Customers want to be in better control through greater transparency and real-time documentation. Reduced administration and faster handling are key issues. Being at the forefront of digitalisation is important for customer satisfaction, and Polygon has high ambitions in this area and has already launched a system for Field Service Management, a state-of-the-art intranet and a collaboration app for property management companies.

SUSTAINABILITY IS BECOMING A NECESSITYSustainability – and especially adaption to, and prevention of, climate change – is an all-embracing trend in society today.

With the mission to preserve and restore value, the damage control industry fits well into this challenge, since our business naturally contributes to reducing the use of finite resources. Polygon’s size and capacity are great advantages when it comes to responding to increased sustainability requirements from customers, employees and investors. Our ambition is to help customers achieve their sustainability goals, and we welcome high sustainability requirements in procurement processes. In addition, we want to integrate sustainability into every aspect of our business, and have therefore developed a responsibility programme, described on page 38.

A WIDE RANGE OF CUSTOMERS Polygon handles approximately 300,000 touch points every year. These jobs span from minor EUR 200 orders to major projects with order values exceeding EUR 10 million.

Our business portfolio is characterised by low single-customer dependency combined with strong relationships with blue-chip insurance companies. These constitute around two-thirds of our business and are stable, long-term relationships reinforced by the ongoing integration of IT systems to form solid and long-term partnerships. Polygon is the preferred supplier of many well-known enterprises and is growing organically inside this prestigious customer base. Sales to our ten biggest customers increased by 26 percent in 2018.

Construction, industry and property management companies are also large customers for Polygon. These account for around 32 percent of our total sales and are growing in importance.

The customers are grouped into segments, with jobs graded according to complexity. A low -complexity job typically involves only one service line and no project management. A medium-complexity job may require more than one service line, including project management and several site visits. Complex jobs usually have a higher order value and require multiple service lines, many technicians and often the use of subcontractors.

POLYGON 2018 9


COMPANY DAYS IN UK STRENGTHEN CORPORATE CULTURE The UK operation is a role model when it comes to employee communication and ensuring that every colleague understands and delivers the company’s goals and culture.

“With a team of over 450 employees based all over the country, continuous communication is vital to have well trained people delivering con-sistent services everywhere, living Polygon’s values,” says Jeremy Sykes, Managing Director Polygon UK & Ireland.

At least once a year the senior management travel around the country over the course of two weeks in order to meet up with every employee. Meetings with groups of colleagues − usually between 25 and 45 – are held, and employees are encouraged to challenge and ask questions. Everything from, “Why are we tracking van fuel economy and driving style?” to, “What is the impact of Brexit?”. The ambition is to have an open climate, and the managers share in-depth information about business results, investments and future priorities. These so-called company days are arranged after the Polygon Group’s yearly management conference and serve as an important complement to day-to-day informa-tion, continuous team meetings, the annual performance review and the employee survey.

“Written information is valuable, but there is no substitute for meeting, shaking hands, sharing a sandwich, sharing the successes and challenges, and saying thank you,” Jeremy Sykes, Managing Director Polygon UK & Ireland, comments.

POLYGON 201810


Brand promiseWhat we stand for

Our core business

Focus

What we doMission

How we do itApproach

What we believe inValues

To whom we deliver Customer segments

Service linesWhat we offer

Always By Your Side.

The global expert in property damage control

We prevent, control and mitigate the effects of water, fire and climate

Solutions through people, technology and knowledge

Integrity, Excellence and Empathy

Companies, households, public sector and insurers

Water damage restoration

Fire damage restoration

Temporary climate solutions

Polygon’s core business is to be the global expert in property damage control, with the mission to prevent, control and mitigate the effects of water, fire and climate.A COMPLETE RANGE OF SERVICESWe offer a complete range of services to meet the needs of all our customers – from households and companies to insurers and the public sector. Having a clear focus and being a dedicated specialist in our industry enables us to deliver a unique offering.

We offer both standardised and tailor-made solutions to a wide variety of customers. Our standards are high thanks to our committed people with a passion for helping others, combined with our industry-leading know-how and state- of-the-art technology.

Every year, we complete more than 300,000 assignments. The experience and insight we gain from this are what drives our continuous development.

CUSTOMER FOCUS AND LOCAL PRESENCEOur brand promise, Always By Your Side, reflects what our customers can expect from us. It goes beyond our service offering. Adding an extra dimension to our deep customer involvement. Our strong local presence, backed by our global strength, enables us to be close to our customers. We are there when they need us the most, so that they can get on with their lives and businesses. We deliver on our promises by applying our core values of Integrity, Excellence and Empathy in everything we do.

THE GLOBAL EXPERT IN PROPERTY DAMAGE CONTROL

POLYGON 2018 11

MISSION AND VALUES

A GROWTH-FOCUSED STRATEGY

Polygon’s long-term strategy has been based on a four-step agenda, with the first two steps about getting the house in order. From 2018 and onwards, the focus has been more commercial, and aimed at growth and increasing sales. During 2014–2017, the first two steps – Structure & Culture and Quality & Consistency – were implemented at all levels and in all units of the Group.

Today, the company is powered by our well-established busi-ness philosophy – the Polygon Model – and is characterised by a distributed organisational structure in which local entre-preneurship is a driving force. All our employees are guided by a strong corporate culture. Quality and consistency are best-in-class and constantly measured. It is fair to say, that by now our house is in very good order.

We have now entered the growth phase of our four-step journey. Our aim is to substantially increase sales, while at the same time continuously maintaining and improving what we have created.

To pave the way for success, we have six strategic focus areas connected to our four-step journey.• Structure & Culture (build a better business and focus on

people and culture)• Productivity & Service Delivery (improve operations)• Portfolio Development (increase share of wallet with our

key account customers) • New Segments & Solutions (grow property management

and commercial insurance)• Cross-Border Solutions (sell and deliver major and

complex claims)• Buy & Build (grow by acquisitions)

STRUCTURE & CULTURE Build a better business By operating in close teamwork and taking advantage of all the knowledge there is in our worldwide Group, we contin-uously improve our business practices. We have tools and

POLYGON 201812

STRATEGY

routines for sharing information and knowledge in a struc-tured way, and we are eager to implement best practices.

In a decentralised service and geographically diverse com-pany like ours, it is extremely important to have a clear busi-ness philosophy, a common set of management principles and guiding core values. We call this framework the Polygon Model, and we have been working with it since 2015.

With 4,000 employees working in different locations, internal communication tools and common processes are vital. We arrange annual leadership conferences, provide a management training programme, collaborate across borders and develop Group-wide systems such as our Field Service Management system. In 2018, our state-of-the-art intranet was nominated for Best Intranet of the Year at the Episerver Website Awards.

Focus on people and culturePolygon’s primary resources are our people, and their dedica-tion and knowledge form the basis for success. All employees are guided by a strong corporate culture based on cause and effect: happy people – happy customers – happy owners. This constitutes the foundation for the way we act and work, and is a prerequisite to create a long-term profitable business.

We have developed an extremely strong and solid corpo-rate culture. This sets us apart from the competition. The corporate values – Integrity, Excellence and Empathy – are a guide in everything we do. This goes for our long-standing employees as well as for the new people we employ or who join our Group through acquisitions.

We work hard to maintain and further develop this culture, supporting what works well and improving what can be made better. In connection with each new acquisition, a process is promptly initiated to pilot new colleagues into Polygon’s culture and way of working. Some of the senior executives of the newly acquired companies have undergone a year-long executive training programme through the Polygon Academy, focusing on building a strong corporate culture and the development of leadership skills.

PRODUCTIVITY AND SERVICE DELIVERY Improve operationsThe Polygon Model is deeply rooted among our employees, and efforts are made on a daily basis to maintain, integrate and develop our way of working. Still, it is a constant job and a never-ending process. Especially since Polygon is growing partly by acquisitions, meaning that we continually gain new colleagues from different parts of the world. This responsibility

OUR STRATEGIC JOURNEY

STEP 4Buy & Build

STEP 3Segments & Solutions

STEP 1Structure & Culture

STEP 2Quality & Consistency

4 Buy & Build– Grow by acquisition

1 Structure & Culture– Build a better business– Focus on people & culture

3B Cross Border Solutions– Sell and deliver Major & Complex Claims3A New Segments & Solutions– Grow Managed Property and Commercial Insurance

2B Portfolio Development– Increase share of wallet with our key account customers2A Productivity and Service Delivery– Improve operations

INTERNAL COMMUNICATION TOOLS AND COMMON PROCESSES ARE VITAL.

POLYGON 2018 13

STRATEGY

lies with our unit managers in their day-to-day management of the business. Efficient and lean processes, digitalisation and highly engaged employees are the core productivity drivers.

We follow our progress through performance indicators. We see steady progress, but there is always room for improve-ment. We need to plan our day-to-day work to minimise ad hoc jobs, sharpen our processes, implement a better com-mercial approach and develop new digital systems that can boost productivity.

The digital agenda was boosted during 2018 via several initiatives. We have continued to develop and implement our Field Service Management system and our strong platform for integration with customer systems called PolyFlow. The latter increases our productivity and ensures improved quality. We already have customers with systems in place for automated claims, and we have created a digital service solution for property managers and their customers (the so-called Spark app) that will allow claims in the property management operations to be handled smoothly.

In early 2018, we bought a minority share in Caption Data, which has been involved in Internet-of-Things (IoT) solutions for Polygon since 2011. Together, we work to provide visibility of moisture levels in damp properties. This provides informa-tion to all parties in an insurance claim, without having to visit a site. We supply this as a service in new-build applications too, where moisture levels are critical.

PORTFOLIO DEVELOPMENT Increase share of wallet with our key account customersAs the industry leader, our key account customers expect us to drive the development of more effective end-to-end solu-tions. Our joint ambition is therefore a complete redesign of the value chain – and it is all about digitalisation. We have implemented a Field Service Management system with the aim to automate processes and facilitate seamless integra-tion with insurers and multiple other external systems. The basic objective of the system is to achieve transparency and trust. Thus, the insurer’s willingness to place a larger portion of the business at Polygon increases.

With our PolyFlow integration platform, we are the first company in our industry to integrate our Field Service Management system with several of the leading customer portals. This enables us to deliver no-touch claims together with leading insurers and other customers. One of the insurance companies that has come the furthest in this area is Gjensidige in Norway. The PolyFlow advantages empower Polygon with attractive growth opportunities within the existing customer base and help us seize the opportunities to become a strategic partner.

NEW SEGMENTS & SOLUTIONS Grow managed property and commercial insuranceOur customers increasingly need faster processing and short-circuited communication routes. This is especially true in property management. Traditionally, the process from reported damage to an actual solution to the problem has included a range of time-consuming barriers that have to be overcome. Polygon is therefore modernising and simplifying our way of working through digitalisation.

A new online application was developed and launched during 2018 – Spark. This is a digital service solution for prop-erty managers and their customers. Spark offers property managers and their tenants digitalised service updates and information about the claims process. Integrated and updated directly from Polygon’s systems, it is an informative and interactive front-end solution with great benefits throughout the claim lifecycle. With Spark, Polygon can resolve issues in a completely new and faster way, and all stakeholders benefit from this integrated value chain. As a first step, Spark was launched for a major Swedish coopera-tive housing company during 2018, and it is currently being rolled out in several parts of Sweden. The plan is to launch Spark in Austria, the Netherlands and Finland during 2019.

During 2018, we also accelerated our effort to better predict and thus avoid damage by using the advantages of IoT. Through internet-connected sensors (measuring humidity, vibrations, etc) in both commercial and residential buildings, we can predict and alleviate damage. The technology protects our customers’ assets while increasing our addressable market, since restoration will increase at the expense of new construc-tion. Escape of water claims are a core area of focus for insur-ance companies as costs continue to rise. By providing solu-tions that recognise water usage and can tell the difference between a leak and normal usage, action can be taken early to alert the property owner of a potential problem or to shut off the water supply automatically. Polygon has been working with various suppliers in the UK to develop smart prevention solutions and is now piloting some of them with the UK’s largest insurers of domestic and commercial properties.

POLYGON HAS DEVELOPED AN OUTSTANDING CORPORATE

CULTURE.

POLYGON 201814

STRATEGY

CROSS-BORDER SOLUTIONS Sell and deliver major and complex claimsThe efforts to leverage the strength of our competence centres for Major and Complex Claims (M&CC) and Document Restoration have seen good progress during the year. M&CC has increased its revenues by 30 percent in three years. Polygon has the qualified employees, the state-of-the-art technical equipment and the emergency supplies needed to promptly deal with large incidents and minimise the consequences. Continuing to extend the geographical scope for M&CC is strategically important.

During 2018, cross-border activities have increased sub-stantially, including several large projects across Europe, and increased awareness has been achieved through customer events in the majority of our countries. In close cooperation, these dedicated teams of professionals can instantly mobilise the resources needed to help industries and other large-scale facilities quickly get back into business after a disaster.

A good example of how the German competence can contribute in other parts of the world is the handling of a major fire at the Norwegian Gardemoen airport in March 2018. Polygon Oslo Nord was called in and was able to achieve a highly successful clean-up and restoration together with colleagues from other parts of the Group. To ensure the best possible results in restoring all the advanced technical equipment, specialists in major and complex damage from Polygonvatro in Germany were engaged.

BUY & BUILD Grow by acquisitionsOur acquisition strategy is ambitious. The long-term target is to be number 1 or number 2 in each country of operation. Potential acquisitions must be active in areas closely con-nected to Polygon’s core businesses. We provide both con-trolled integration into our business systems and additional opportunities for acquired companies.

Starting with acquisitions in 2017, Polygon stepped up the efforts in 2018 and successfully acquired companies in five countries – Denmark, Germany, Norway, Sweden and the UK.

With the acquisition of Caliber Sanering and Refix Skade-sanering, the service portfolio in Sweden expanded into the fire damage market. This is well in line with the growing demand among insurance customers for one-stop shopping. Another strategically important highlight was the acquisition of the well-respected chartered building company Neways Property Care in the UK. This acquisition enables us to pro-vide UK-based insurance customers with a comprehensive offering of restoration and repair services.

The acquisitions of Dansk Bygningskontrol in Denmark (2018) and Skadegruppen in Norway (2017) have made Polygon the largest company within the property damage restoration industry in the Nordic region. Simultaneously, our leading position in Europe is strengthened.

The most substantial acquisitions during 2018 were Dansk Bygningskontrol with annual sales of EUR 29 million, Neways Property Care in the UK with annual sales of EUR 6.1 million, and Von der Lieck in Germany with annual sales of EUR 4 million.

POLYGON 2018 15

INCREASED SALES AND CLOSE RELATIONSHIPS WITH LARGE CUSTOMERSStrengthening relationships with key account customers, and increasing share of wallet, is an important part of Polygon’s strategy. In 2018, the German and Norwegian operations have shown great results, including the following.

NEW APPROACH IN GERMANYIn recent years, Polygonvatro Germany has significantly increased its sales to insurance companies thanks to a strategic approach to key account management. From having previously worked primarily with the insurance companies’ central units, Polygonvatro Germany has enlarged its focus on local sales and support the branches to build more relationships as well. Polygonvatro Germany currently has all major insurance companies in Germany as customers, and most have framework agreements. Most of these customers have grown significantly over the years due to certain success factors.

“We are considered high quality in the business, a good sales network and we prioritise building long-term relationships. These are the main rea-sons why we have succeeded so well. In addition, we are good at teamwork on all levels and at inspiring each other,” says Christian Mayer, Key Account Manager at Polygonvatro Germany.

EXTENDED COOPERATION IN NORWAYAnother great example of portfolio development from 2018 is the contract that Polygon in Norway won with insurance company Store-brand. The contract covers all of Storebrand’s damage restoration in Norway, runs for at least three years, and makes Storebrand Polygon’s third largest customer in Norway. Polygon will assist the customer with everything from water, fire and smoke damage repair to oil spill clean-up and other environmental damage.

A decisive factor in the choice of Polygon was the companies’ shared ambition to reduce environmental impact. In line with this, a study is currently ongoing into how to replace parts of the fleet with plug-in electric vehicles.

CROSS-BORDER COOPERATION HELPED A DANISH CUSTOMER Thanks to successful cooperation between Polygon in Denmark and Polygonvatro in Germany, an intensive damage restoration effort could be carried out at a large industrial complex in Denmark that was severely impacted by fire.

Once the firefighters had the blaze under control, it was clear that far-reaching measures would be necessary to salvage the machinery. The insurance company contacted PolygonDB and they, in turn, contacted Polygonvatro in Germany as they understood that the assignment would demand enormous resources. Everything went according to plan and the customer, the insurance company, was more than satisfied.

“After our success in saving all of the machinery and finishing the job on schedule, I feel confident that PolygonDB and Polygonvatro Germany can look forward to more collaborative assignments in Denmark,” Michael L. Mølgaard, Claims Process Manager at PolygonDB concludes.

Polygon is a decentralised service company with a distributed orga-nisation and a strong base of unit managers, for whom local entre-preneurship is the foundation for success. We have a clear business philosophy and a set of management principles that guide us in our daily work. We call it the Polygon Model. It contains everything needed to position us as the global expert in property damage control. And it gives us a solid base to lead industry transformation.

THE VALUES – OUR FOUNDATION Integrity, Excellence and Empathy. These are our values and the foundation of our business philosophy. They serve as a guide to our people in their everyday interactions with customers, colleagues, partners and other stakeholders.

Integrity means that we are honest, accountable and reliable.

Excellence means that we are experts and knowledge leaders, that we strive for continuous improvement and apply best practices.

Empathy embodies our understanding of our customers’ situations, our desire to be helpful and that our people make the difference.

THE METHOD – A SET OF MANAGEMENT PRINCIPLESThe Method is our principles that unit managers follow in their day-to-day management of the business.

Create a Simple Organisation is about reducing bureaucracy and placing a stronger focus on the customer. We continu-ously reinforce the importance of clear accountabilities and teams large enough to be efficient, yet small enough to make quick decisions. We can thereby respond swiftly to our customers’ needs, which is crucial for success in our business. Creating a simple organisation is vital in a decentralised service organisation supported by global guidelines.

Lead by Example connects our core values with the way our managers lead. It is about delivering on promises, making things happen and caring about our customers and our own people. This type of leadership fully leverages the power of the simple organisation.

Measure for Progress is a set of tools that help us focus on performance − input − rather than only measuring output through financial reports. All of our units are measured on ten simple performance indicators in the areas of business performance, customer satisfaction and employee perfor-mance.

Manage our Risks represents our way of identifying the most significant risks to create awareness and avoid threats to our business. The key risk areas are finance, IT, contracts and assignments, human resources and governance.

Advance our Industry is about our responsibility to promote good working terms and conditions for our employees, while striving to ensure that our competitors meet the same standards. As an industry leader, we feel a strong sense of

HOW WE WORK – THE POLYGON MODEL

POLYGON 201818

BUSINESS APPROACH

THE POLYGON MODEL

responsibility to drive this development and we are con-vinced that it will benefit our whole industry, our employees and our customers.

Earn the Right to Grow is about developing our business in the right sequence. This means getting the basics in place and delivering our core services in a consistent way before venturing into new business areas or making acquisitions.

THE SOLUTIONS – PROCESSES FOR BEST PRACTICE Our Solutions defines our core processes of selling, service delivery and continuous development. It helps us to deliver consistent quality to our customers by defining best practice in each area. Our Solutions processes are always connected to the specific customer segments in Our Markets, helping us to remember that, based on specific customer needs, processes vary for each segment.

THE BASICS – OUR COMPANY AND CUSTOMERSOur Company encompasses our brand promise, focus, mission, approach, values, customer segments and services. (See page 11.) The purpose is to create a strong sense of belonging and a consistent corporate identity. We work with many customers in different geographical locations, and our goal is to provide the same experience to all of them.

Our Markets clearly sets out the customer segments we serve and helps us identify the most important stakeholders and their needs in order to adapt our service delivery accordingly.

OUR GOAL IS TO PROVIDE THE SAME EXPERIENCE TO ALL

OUR CUSTOMERS.

POLYGON 2018 19

BUSINESS APPROACH

Polygon’s measuring model focuses on a few essential parameters: employees, customers and financial performance. The model is designed to fit our decentralised organisation. It is simple to use and understand, with the aim to make it easy for our unit managers to get a grip on actual performance and make appropriate corrections when necessary.

In order to monitor our performance, we have a number of indicators that quickly let us know whether things are as they should be. In line with our philosophy of putting people first, we follow this belief when we measure our performance. We start with measuring our employee performance, followed by customer satisfaction and, only then, our business performance indicators.

When following the indicators, it is important to under-stand that these only provide a signal of where things are heading. Understanding why a certain result appears, and what might need to be done, can be a time-consuming task, demanding thorough analysis.

EMPLOYEE PERFORMANCE We strongly believe that happy employees deliver results, and this is proven by the high correlation between employee satisfaction and financial performance. Happy employees, happy customers. We measure this indicator every year via the net promotor score (NPS) and follow it up thoroughly. To be able to judge if we have the appropriate numbers of employees in different categories, we also monitor the head count.

The NPS can range from -100 to +100. Any score above zero is considered favourable, and an NPS of more than 50 is excellent. For 2018, Polygon’s NPS remained on a solid level of 51 (51) and gained market share.

CUSTOMER SATISFACTIONWe measure and monitor our customers’ perceptions of our services. Just like employee satisfaction, customer satis-faction has a direct influence on our financial performance. We also monitor our process quality through various measurements such as credits and follow-ups of customer complaints. The correlation between good processes and a good gross margin is also strong.

BUSINESS PERFORMANCEWe have identified six fundamental factors that influence financial results and cash flow, and thus form the foundation for development. These factors are functional and relevant at all levels of the organisation.

Net salesIt is of crucial importance that we can attract new customers. Certain sections of our business are more dependent on new sales than others, since they do not work with framework

OUR MEASURING FOCUS: EMPLOYEES, CUSTOMERS AND FINANCIAL PERFORMANCE

51%For 2018, Polygon’s NPS remained

on a solid level of 51 (51).

POLYGON 201820

MEASURE FOR PROGRESS

agreements. Temporary Climate Solutions is one example. For full-year 2018, net sales amounted of EUR 43 million, represent in a growth of over 8 percent.

Portfolio developmentThe importance of taking care of customers and delivering high quality can never be exaggerated. We follow up and measure this by reporting portfolio development. This indicator focuses on monitoring the development of our largest customers, which is popularly known as key account management.

The organic growth of over 7 percent is clear proof of good portfolio growth.

Job valueThe third business performance indicator is job value. By monitoring this, we can minimise our revenue leakage. We can ensure that we charge for the service we have provided under our customer agreements, ensuring that invoices are prepared at the right prices. A decrease in job value may, for example, indicate that a service is not being billed or provided.

Gross marginProductivity is measured by monitoring the gross margin. Put simply, the gross margin is sales minus direct project costs, such as technical personnel, materials and the costs of subcontractors. The gross margin is dependent on how effi-ciently we make use of our own personnel – our utilisation ratio. A low gross margin compared with similar entities indi-cates problems in the projects. These may include the effect of insufficient quality resulting in an unnecessarily high num-ber of visits to the work site, and insufficient planning result-ing in a low utilisation ratio. Variations in the gross margin may also be due to a mixture of services in which the gross

margins vary according to which services we sell. In general, the margin on a service is linked to solutions, and those with a more technical content have a higher margin than those that are simpler in nature.

In 2018, the gross margin has deteriorated somewhat due to a number of reasons, one of them being the effects from implementing new processes.

Indirect costsThe level of indirect costs tells us, for example, whether we have the right structure for our back office and premises. Does our support organisation (including finance, HR, marketing, IT, project support) deliver services efficiently? An efficient structure can usually manage increasing volumes without more resources.

Since 2015, Polygon has successfully decreased its indirect costs. The main bulk of the profit growth comes from the leverage of keeping costs relatively constant and at the same time increasing sales.

Cash/DSOThe sixth financial performance indicator is cash, or days of sales outstanding (DSO). Problems with DSO, such as delays in payment, can indicate deficiencies in quality in the form of project delivery, or administrative problems with billing. Each Polygon entity can contribute to a healthier balance sheet by scoring high on this indicator.

DSO has been kept at the same level as in 2017.

RELEVANT AND THOROUGH FOLLOW-UP• Successful management of

our ten measurements will improve the Group’s income statement, balance sheet and cash flow. We follow each unit to endure that good management of our measurements = good profit development.

• We only measure what can be influenced by an individual entity. A local entity cannot influence the expenses for the Group’s head office, and this is therefore not included in that entity’s income statement.

THE IMPORTANCE OF HIGH QUALITY AND CUSTOMER CARE CAN NEVER BE EXAGGERATED.

POLYGON 2018 21

MEASURE FOR PROGRESS

CUSTOMER BENEFITS WITH SPARK – A NEW DIGITAL SERVICE SOLUTION Polygon has developed a digital service solution that offers property managers and their tenants service updates and information about a claims process. The online application – Spark – is integrated and updated directly from Polygon’s systems, with great benefits for all involved stakeholders.

When a damage case is opened, the tenant receives a message with confirmation of a booked appointment with Polygon, and an invita-tion to the Spark solution that can be opened in an internet browser. Both property managers and tenants are continuously informed about important events and details via messages from Polygon. Property managers can decide which information to include in the solution for their tenants.

Spark enables Polygon to resolve issues in a completely new and faster way, and no middle-men are needed.

Spark was developed in cooperation with the Nordic IT company Evry and launched with HSB, a major Swedish cooperative housing company. The plan is to launch Spark in Austria, the Netherlands and Finland during 2019.

Polygon is the fully-fledged specialist in property damage control and temporary climate solutions. Our services are categorised according to the cause of damage – water, fire and climate. Our specialists are organised the same way and we can regroup our resources to take care of major disasters that require an all-in effort. Scale and resources are important Polygon advantages.Whatever the cause of the problem, we offer a complete range of services – from standardised to tailor-made solutions and from one-offs to partner agreements. This makes us an overall partner for our customers. They can find whatever services they are looking for under one roof.

WE PREVENT, CONTROL AND MITIGATEBy tradition, our focus is on the restoration of damaged property. This is more cost effective and environmentally

sustainable than rebuilding. We have a wide range of services covering every aspect of this area. From damage assessment to post-incident mitigation. On average, a property resto-ration job takes ten weeks to complete.

There is an increasing demand for preventive measures and we help our customers identify risks, avoid incidents and achieve moisture control and better indoor air quality. Prevention is becoming ever more important as a compe-titive advantage, and our aim is to be at the forefront. To achieve this, we utilise Internet-of-Things (IoT) solutions, for instance connected sensors that collect real-time data including as moisture and temperature. Polygon in the UK and in the US are leading the way and have already seen great impact, including more customer touch points and more proactive and predictive operations.

A ONE-STOP SHOP FOR PREVENTING, CONTROLLING AND MITIGATING

WATER

Consulting

Technical reconditioning

Document restoration

Leak detection

Water damage restoration

FIRE

Consulting

Technical reconditioning


Fire damage restoration

C LIMATE

Consulting


Temporary climate solutionsCONTROL

PREVENT

SERVICES

MITIGATE

PREVENTION IS BECOMING INCREASINGLY

IMPORTANT.

POLYGON 2018 23

OFFERING

WATERFlooding. Heavy rain. Storms.

Frozen or leaking pipes. Whatever the cause of the damage, action must be

immediate and professional – and Polygon is close at hand.

Polygon’s water specialists handle everything from small leaks to major incidents caused by flooding. We are experts in salvaging damaged property, equipment and documents to the greatest possible extent, and we also contribute to preventing future damage.

RESTORATION STEP BY STEPOur water damage restoration services typically include pumping away residual water and removing furniture and other valuables to prevent further damage. Once the damaged site is controlled, the drying process begins, using energyefficient drying and dehumidification equipment. By using technology such as remote monitoring, the drying process can be monitored offsite.

Factors such as the composition of the wet materials, air-flow and humidity levels determine the approach. Sometimes the use of heat mats or heat sticks is required in addition to standard equipment. A growing business for Polygon is taking on responsibility for restoration of the site, such as replace-ment of wall and floor materials or the rebuilding of fittings.

It usually takes time to sort out a claim for water damage (or any damage). In the meantime, the affected company racks up costs and customers might be lost. Getting the business back up and running quickly is crucial. In many coun-tries, Polygon therefore offers our customers a membership service to get expert help without unnecessary delays.

Polygon also has a specialised service for reconditioning damaged equipment and machinery.

HELP WITH ALL TYPES OF WATER DAMAGE

WATER DAMAGE RESTORATION SERVICES INCLUDE:• Alarm response• Damage assessment• Claims handling• Demolition• Drying• Mould remediation

• Remote video• Remote monitoring• Specialist water services• Video scoping• Technical reconditioning • Major and complex claims

53%Share of sales1)

1) Including Major and Complex Claims 12%

OFFERING

SAVING TIME, MONEY AND EMISSIONSTo dry a building instead of demolish and rebuild it has many benefits. It generates less CO2 emissions and also saves money thanks to less cost for building material and less need for man hours working with demolition and rebuilding. In addition, Polygon always tries to find the smartest and most discreet solution when drying a building. This means that all or part of the premises can remain in use and that the affected customer can keep the business running during the drying period.

SALVAGING VALUABLE DOCUMENTSEach year, we perform services to salvage millions of paper and film-based documents from damage caused by water or fire. The types of documents may range from historical artefacts to tax, medical and legal records.

Damaged documents deteriorate quickly, so timely and appropriate recovery is necessary to halt the progression of damage. Polygon uses the most technically advanced processes and equipment to meet the specific needs of each project. We have the largest dedicated facilities and staff across a number of countries to offer unrivalled support in document restoration.

Polygon has two Centres of Excellence for Document Restoration – one in the UK and one in the US. We also have a service centre in Germany for these kinds of job. By signing a partner agreement with Polygon, companies gain priority

LEAK DETECTION TECHNIQUES INCLUDE:• Acoustic • CCTV drainage surveys• Thermography

• Tracer gas • Video endoscopes • Correlation

access to our world-leading expertise. One that is familiar with their business and ready to respond immediately when needed. This keeps the interruption of the business as short as possible.

LEAK DETECTION We also offer a range of leak detection services. These reduce risk and mitigate damage by accurate, non-destruc-tive detection where traditional methods will be destructive or have failed.

A leak may be undetectable to the naked eye and might be located in, for example, a pipe, a roof, a heating system or a swimming pool. The potential damage as a result of a leak-ing pipe should not be underestimated. A 0.5 mm leak could lose 20 litres of water an hour! We use multiple techniques to identify leaks and minimise damage to property, including infrared cameras, tracer gas, smoke and air pressure.

Since prevention is key, our service is designed to identify areas of concern before damage occurs.

COPING WITH MAJOR INCIDENTSFor large-scale disasters, Polygon has an emergency stock of dehumidifiers, fans and other equipment at the Centre of Excellence for Emergencies in the Netherlands. From this hub, equipment can be put into operation all over Europe within no more than 48 hours. The service is unique and gives us the capacity to respond powerfully to major incidents. Our resources are always only a phone call away.

DOCUMENT RESTORATION SERVICES INCLUDE:• Disaster recovery• Emergency stabilisation• Complete project

management• Freeze-vacuum drying and

freeze drying• Sanitisation• Smoke and soot (carbon)

removal

• Deodorisation• Dehumidification and drying• Emergency planning and

training• Scanning• Storage• Consulting• Archival and artwork

conservation

POLYGON CAN RESPOND POWERFULLY TO

MAJOR INCIDENTS.

POLYGON 201826

OFFERING

FIREClearing soot and debris.

Drying up water left by the extinguishing work. Restoring buildings, machines and

equipment. These are the major restoration challenges after a sudden

fire, and Polygon is equipped to take on the job anywhere – from start to finish.

FIRE SERVICES TO QUICKLY GET BACK IN BUSINESS

Once a fire is extinguished, it is time to call in Polygon. Our job includes cleaning, drying and restoring of buildings, machines, documents and equipment – always with the goal to get the customer back in business as quickly as possible.

Polygon’s role in a fire incident is to clean up after the fire and mitigate the secondary effects. This includes smoke damage, oxidisation and water damage caused by extinguish-ing the blaze. Our services also comprise the restoration of damaged equipment and managing subcontractors to restore the property to original condition. All to make the site ready and operational as soon as possible.

PLANNING AND PROJECT MANAGEMENTCleaning up a fire site involves clearing ash and debris and retain what can be saved. In some cases, the clean-up will reveal further water damage, which necessitates a drying process.

Large fire damage restoration jobs may require sharing knowledge and equipment between different Polygon units. Some parts may be mainly affected by water and some parts by smoke. A total plan has to be designed. What can be recovered at reasonable costs? What cannot be saved? Polygon takes on the project management role, has the answers and is equipped to have it done. During 2018, Neways Property Care in the UK was acquired, enabling Polygon to offer a full service of property damage repair and

FIRE DAMAGE RESTORATION SERVICES INCLUDE:• Cleaning• Transportation• Content removal & storage• Carbon removal• Ultrasonic cleaning• Odour neutralisation

• Corrosion control• Reconstruction of property

and contents• Technical reconditioning• Major and complex claims• Water damage

40%Share of sales

POLYGON 201828

OFFERING

restoration in the country. The acquisition added 54 employ-ees and annual sales of GBP 5.4 million.

Polygon is also equipped to take on cross-border jobs, as well as work on ships and oil platforms. We have experts certified to work offshore in these highly specialised environ-ments.

MAKING EQUIPMENT WORK AGAINIn Germany, Polygon has a Centre of Excellence for Tech-nical Reconditioning of water and fire-damaged equipment, tools and machinery. This is a highly specialised service that is usually carried out jointly with the equipment manufacturer and under strict quality guidelines. It involves dismantling machinery damaged by fire or water – often manufacturing

equipment or complex instruments. The work can be executed on the customer’s premises or at our Centre of Excellence.

Typical applications for reconditioning include power electronics, computers and office machines, medical equip-ment, telecom devices and electrical panels. Reconditioning can save up to 60 percent of the cost of purchasing new machinery. It also reduces business interruption.

SALVAGING FIRE-DAMAGED DOCUMENTSPolygon has two Centres of Excellence for restoring damaged documents – one in the US and one in the UK. There is also a service centre in Germany. We have the largest dedicated facilities and staff across a number of countries to give our customers unrivalled support in document restoration. This expertise is mainly used in connection with water damage, but can be used for fire-damaged material whenever needed.

WE ALWAYS MAKE A TOTAL PLAN FOR WHAT CAN BE SAVED AND

RECONDITIONED.

POLYGON 2018 29

Drying. Cooling. Heating. Whenever the climate conditions of a site need

modification, considerable know-how is required to make sure conditions turn

out perfect. Polygon has the expertise. We offer comprehensive climate

solutions for controlling the temperature and humidity of a building and manufacturing environment.

CLIMATE

Polygon offers comprehensive climate solutions for controlling the temperature and humidity of a building or manufacturing environment.

We can heat a construction site during sub-zero tempera-tures. We can reduce moisture levels on an oil platform so that it can be repainted. We can control moisture levels in a food processing plant during humid summer months. Just to give a few examples of our competence span.

MANAGING MOISTURE EFFECTS THROUGHOUT THE LIFECYCLEOur lifecycle consulting comprises project planning and measurements to create better indoor environments throughout the entire lifecycle of a building. Our expert building engineers are engaged to ensure that issues stemming from moisture are minimised and managed.

Our offering includes a wide range of drying, cooling, heating and remote monitoring services. Assignments may last from several months to a year or more. We manage the effects of moisture throughout the entire lifecycle of a building – from preliminary study of construction projects to demolition. Through continuous measurement and tracking, we ensure that the right conditions are maintained over time.

Our services demand extensive knowledge about building construction, airflow dynamics, ventilation requirements, the

A WIDE RANGE OF CLIMATE SOLUTIONS

TEMPORARY CLIMATE SOLUTIONS INCLUDE:• Dehumidification• Humidification• Air conditioning• Heating• Air exhaust• HEPA filtration

• Chilled water• Total climate control• Remote monitoring• Equipment sizing• Project engineering

7%Share of sales

OFFERING

impact of ceiling height and air leakage as well as the effects of outdoor temperatures and humidity levels. More than 50 percent of construction errors occur on the drawing board. Through early identification of at-risk structures from a moisture standpoint, costly future renovations can be avoided. Polygon has certified moisture safety engineers who can help in many areas.

30 YEARS OF DESIGNING SOLUTIONS FOR CONSTRUCTION SITESPolygon’s Centre of Excellence for Climate Solutions in the US has over 30 years of experience of designing temporary dehumidification solutions for the construction environment. We also have specialised technicians who are trained for offshore assignments.

Coping with dehumidification is essential for building projects to be executed with maximum efficiency and quality. Large parts of the US have a very humid climate. This implies special prerequisites for the choice of paint and building materials.

Extreme temperatures are the main reason for disruption on worksites. Working conditions can become difficult, processes may be delayed, machinery and electrical equip-ment are liable to failure. The obvious results are losses in productivity and product quality.

The use of temporary heating or cooling reduces these risks by effectively keeping all temperature-related challenges under control. Polygon offers vast knowledge, experience and technical expertise in addressing these kinds of problem.

The entire process and its development are easily super-vised thanks to Polygon’s Exact Aire® – the most advanced system available for monitoring interior environments throughout the construction project.

SOLUTIONS FOR SURFACE PREPARATION AND COATINGSudden weather changes can seriously affect freshly blasted steel surfaces. Polygon US is a leading specialist in providing state-of-the-art desiccant dehumidifiers that protect the blast during all moisture or temperature changes.

Polygon has developed a method that fully controls temperature and humidity, allowing the use of the correct coating without concern for the weather during application and cure. Our dehumidifiers will hold the blast between shifts. This way the need to paint-up each day is eliminated. Condensation problems are reduced and coating produc-tivity is improved.

Polygon provides engineered solutions and maintains the largest fleet of climate control equipment in the industry. Our application specialists ensure a project stays on schedule with minimal downtime. In addition, coating life can be pro-longed and coating costs be reduced by up to 20 percent.

KEEPING FOOD SAFEFood has to be handled with ultimate care and under safe conditions - all the way from the farm to the consumer. This starts at the farm, where well-cared-for animals are more productive and valuable. Failing to control environmental conditions can cause discomfort for the livestock. When products arrive at the processing facility, controlling tem-perature and moisture levels is critical to producing quality. High humidity can lead to increased bacterial growth and drippage that contaminates the food.

Polygon provides climate control solutions to deal with the most difficult moisture problems at food processing facilities. Our temporary drying systems reduce maintenance problems such as iced refrigeration coils, wet floors, mould growth and condensation. The temperature is monitored to maintain hygiene standards, ensure product safety and eliminate airborne contaminants.

IMPROVING INDOOR AIR QUALITYPolygon’s indoor air quality concept comprises everything from pre-study, design and construction to maintenance, protection, assessment and recommendation of appropriate actions to improve indoor air quality. We do this in such a way that the building remains usable, and we prevent situations that will disrupt the operation of the building. Through our smooth approach, a sick building can be transformed into a healthy building, all to the benefit of the owners and the people working inside it.

INTERNET-OF-THINGS SOLUTIONSOur ambition is to be at the forefront of digitalisation and Internet-of-Things solutions for climate control. We have launched, and are continuously developing, real-time services that help construction companies and the public sector to monitor temperature, moisture, dew points and volatile com-pounds in the indoor air. Information is gathered via wireless sensors and transferred through the cloud. Everything is then controlled from easy-to-read dashboards.

WE MANAGE THE EFFECTS OF MOISTURE

THROUGHOUT THE ENTIRE LIFECYCLE OF A BUILDING.

POLYGON 201832

OFFERING

DIGITAL TOOLS PROFESSIONALISE THE INDUSTRYDigitalisation is a strategic priority for Polygon, and we are continuously developing solutions that benefit our customers, employees and part-ners. These include PolyStop and the PsycIt app.

LESS WATER DAMAGE WITH POLYSTOPIn the UK, for example, Polygon has brought its digital PolyStop device to the market. This helps property owners manage water usage and reduce damage from leaks. PolyStop learns nor-mal water consumption and sends a smartphone notification if flows become abnormal. The device also allows the water to be remotely shut off using a phone, and can even be set to inde-pendently decide to turn off the water. Escape of water claims are the highest cost claims for insurers, and these costs are constantly rising. PolyStop has been developed with the aim of preventing or reducing the impact of these damages.

US APPS BENEFIT INTERNAL AND EXTERNAL PROFESSIONALSIn the US, there is an app for employees called PolygonPro that gives operations teams the ability to access job information on android devices. The app includes job site safety analysis, equipment performance, job notes and elec-tronic client signature functionality.

The US also offers a psychrometric app called PsycIt, a valuable time-saving tool for building site managers, quantity surveyors, architects, engineers and HVAC technical staff. The app quickly and precisely computes up to six properties of the air, allowing more accurate assessment of the time needed to efficiently dry a controlled space.

CONSOLIDATED EXPERTISE FOR THE BENEFIT OF ALL CUSTOMERS

Excellence is one of our core values. To back up this claim, we have estab-lished five Centres of Excellence where we are consolidating our expertise in a number of strategic areas. This expertise works across borders and develops practices that benefit customers in all our markets.

Excellence in one place breeds excellence in another. This benefits every entity in the Polygon Group and, in turn, all our customers. Ultimately, this will elevate our entire industry to a new level of professionalism.

MAJOR AND COMPLEX CLAIMS IN GERMANYOur technical Centre of Excellence in Germany is driving excellence when it comes to dealing with major and complex claims that require special skills and exceptional work in property damage control. The German organisation has a unique and well documented way of working, available to other subsidiaries in the Polygon Group.

The team of 70 specialists connected to this Centre of Excellence are dedicated to working with technical and industrial losses. They have special trucks ready to turn out immediately at the scene of an accident. These trucks act as mobile coordination centres and have emergency supplies available.

Technical reconditioningThe German Centre of Excellence for Major & Complex Claims also possesses unique skills in technical recondition-ing. Through the specialists at this centre, water and fire- damaged equipment, tools and machinery are taken care of and restored. A high level of expertise and knowledge is required to handle damaged machine tools. Special knowl-edge and technical expertise are essential at every step of the process. And you must have access to the advanced technical equipment required to complete the recondition-ing professionally. The Centre is completely up to date in all aspects of this complex business. Our services can usually save up to 60 percent of the costs of purchasing new machinery.

An expanding businessMajor & Complex Claims in Germany has demonstrated the power of its business and increased its revenues by EUR 23 million in 4 years. Expanding this business is a strategic focus area, and cross-border collaborations have been established with Austria, the Netherlands, Belgium and the Nordics.

DOCUMENT RESTORATION IN UK AND USPolygon’s operations in the UK and US jointly constitute Polygon’s Centres of Excellence for Document Restoration. They exchange experience and know-how and enable the Group to offer comprehensive and unrivalled services in document restoration across a number of countries. Their

POLYGON 201834

CENTRES OF EXCELLENCE

combined knowledge and skills are drawn upon by the local subsidiaries in different types of complex restoration project.

Document restoration is an extremely specialised busi-ness, involving both individual professionalism and dedicated technical equipment. Our European operation, branded Har-well, is one of the most experienced companies in this area, and Polygon has retained the name because the company’s skills are also in demand outside the Polygon Group.

The market for document and specialist restoration con-tinues to grow as customers across all sectors recognise the potential in restoring items rather than trying to recreate them. This include the industry, services, domestic and heritage market.

Cold snap in UK and Ireland 2018In February 2018, the UK and Ireland were affected by a cold snap that brought unusually low temperatures and heavy snowfall to large areas. The weather event was named the Beast from the East, and Polygon’s efforts turned out to be the largest emergency assignment in 2018, with 1,500 geo-graphically spread claims in a few days, mainly due to water tanks freezing in private homes. A special surge team was set up so that business-as-usual claims could also be handled simultaneously. The weather, the number of claims and the geographical spread were challenging, but the assignments were solved overall with great success.

Large document restoration effort for the French governmentAn excellent example of how all of Europe can benefit from the UK Centre of Excellence was a job for the French govern-ment in 2018. Polygon assisted with a major document resto-ration project following water damage to 10,500 boxes of government documents at the Ministry of Culture. The dam-age was extensive and the project demonstrated how Poly-gon can provide cross-border support and solutions. Experts from the UK were called in to support the team in Paris.

The restoration process involved freeze-vacuum drying, sanitisation and specialist cleaning, and Polygon successfully restored the irreplaceable documents, meeting the custom-ers’ needs at all times.

EMERGENCIES IN THE NETHERLANDSLarge-scale natural disasters call for large-scale efforts in terms of both qualified people and high-performance tech-nical equipment.

Polygon’s Centre of Excellence for Emergencies in the Netherlands is available to all European Polygon subsidiaries. It constitutes Polygon’s Euro stock – a unique capacity resource with 3,500 dehumidifiers, fans, heaters and other types of equipment stocked under one roof. The fleet was extended during 2018 with 200 fans and 16 econ heaters.

The equipment is available 24/7 for major emergencies. It takes a maximum of two workdays, often only one, for the equipment to be shipped by truck and arrive at a damage site anywhere in Europe.

CLIMATE SOLUTIONS IN THE USOur Centre of Excellence for Climate Solutions in the US has world-leading expertise in the areas of moisture and tem-

perature management and control. Every year we provide temporary climate solutions for over one million square metres of buildings.

By using energy efficient equipment, we create the right conditions to avoid shutdowns due to climate problems or regulatory restrictions. On construction sites, we keep cold-temperature-related risks and problems under control, enabling building projects to stay on time. And in food processing, we provide climate control solutions to deal with temporary moisture challenges due to warm temperatures, so that required hygiene and product safety standards can be maintained.

We employ the most professional, state-of-the-art equip-ment. But, more importantly, we are specialists dedicated to engineering solutions.

Polygon came to the rescue when hurricanes hit the USIn the US, severe floods and hurricanes are frequent. In 2018, the two most devastating hurricanes were Florence in Sep-tember and Michael in October. Polygon was called in to help get the affected communities back to normal as soon as pos-sible. Our large fleet of dehumidification and climate control equipment as well as our experienced, dedicated and knowl-edgeable technicians willing to work long hours, were invalu-able in achieving this mission. In total, the storms led to an increase in sales of approximately USD 2.3 million in the US.

MOISTURE CONTROL IN SWEDENOur Centre of Excellence for Moisture Control in Sweden is dedicated to predicting and preventing moisture problems. We handle all types of assignments with both expertise and equipment.

Moisture control is a challenge through the entire building process – from initial planning to final inspection. Lack of expertise in this area can cause major disruptions, unneces-sary waste and costly delays. The earlier we are involved in a project, the better the assistance we can give.

We have unique technical competence, we employ the most up-to-date instruments and equipment, we minimise environmental impact and we have a well-equipped labora-tory to support our efforts. Since this is quite a new science, we have instinctively been very active in developing new methods and techniques to help our customers in the best possible way.

Moisture control is an emerging business, and the Centre of Excellence demonstrates our ambition to lead the way forward.

Heating complements dry airIn recent years, the traditional dehumidification technique – based on dry air – has been increasingly supplemented with heating of materials using so-called heat mats. In many situa-tions, this can bring faster and more energy efficient results. The method is, for example, very useful in time-critical new construction projects as it is important to avoid moisture in the buildings.

POLYGON 2018 35

CENTRES OF EXCELLENCE

A GLOBAL PLAYER WITH LOCAL UNDERSTANDING

Polygon has over 300 depots in 13 countries and 3 regions. We com-bine local understanding with inter-national insights in a unique way.

NORDICS AND UK Polygon is the largest provider of property damage resto-ration services in the Nordics and the UK. During 2018, we have significantly strengthened our market positions in Denmark and the UK.

Denmark After the acquisition of Dansk Byg ningskontrol, with 230 employees, Polygon has a very strong position in Denmark as one of the two largest players. The offering is focused on fire and water services. The integration of Dansk Bygningskontrol has been very successful, and the develop-ment during 2018 was very good. Cross-border collabora-tions are increasing, and in 2018 two major and complex claims were carried out, one with Germany and one with Norway.

Finland Polygon is a market-leading full-service provider with good national coverage in Finland. Additionally, we offer industry-leading services within indoor quality for public properties. The development did not live up to expectations in 2018, but initiatives to strengthen quality, culture and processes have shown results.

Norway Polygon Norway is a market-leading full-service provider and has been very successful in collaborations with Polygonvatro Germany during 2018. The integration of Skadegruppen, which was acquired in 2017, has been in focus in parallel with sales and improvement in leadership, culture and processes. The minority shares in two Norwegian franchisees and all the shares in our franchise partners in Drammen and Kongsberg were acquired in 2018.

Sweden In Sweden, Polygon is a market leader in water dam-age restoration. Our Centre of Excellence for Moisture Control is located in Sweden. With the acquisition of Caliber Sanering, we entered the fire damage restoration market and subse-quently also acquired Refix Skadesanering. Efforts to increase sales to customers in managed property have been successful, and the Spark app that was developed together with HSB, the largest cooperative housing association in Sweden, has been well received. The implementation of the Field Service Man-agement system has progressed during 2018 and has initially had some negative effects on internal efficiency. During 2018 the Swedish consultancy business has been involved in several large hospital projects. The competence in environmental management and certification has been particularly requested.

UK In the UK, we acquired Neways Property Care, enabling us to offer full-service property damage repair and resto-ration in the country. The acquisition added 54 employees and annual sales of GBP 5.4 million. The Centre of Excellence for Document Restoration is partially located in the UK, and the UK operation, branded Harwell, is one of the most expe-rienced companies in this area.

Share of Group sales, 33% Share of Group employees, 44%

NORDICS AND UK

Sales Adjusted EBITA

EUR million 2018 2017 2018 2017Nordics and UK 202.7 144.0 8.4 6.0Continental Europe 382.7 335.9 21.3 19.8North America 34.7 32.6 4.4 4.3Other1) – – 5.6 3.0

SALES AND ADJUSTED EBITA

POLYGON IS THE LARGEST PRO-VIDER OF PROPERTY DAMAGE

RESTORATION SERVICES.

1) Royalty fee minus head quarter costs.

POLYGON 201836

COUNTRIES AND REGIONS

CONTINENTAL EUROPEPolygon has operations in Germany, France, Austria, the Netherlands and Belgium, and cross-border assignments are increasing every year, especially when it comes to Major & Complex Claims. Polygon also entered a new market in Switzerland after year end, with the acquisition of Alvisa 24.

Germany The German operation accounts for 54 percent of Polygon Group sales and is the home of our Centre of Excellence for Major & Complex Claims. Polygon is by far the biggest player in the property damage control business in Germany. The German operations had very good develop-ment in 2018.

During 2018, we completed an acquisition of Von der Lieck in Germany. The company offers drying and leak detec-tion services and added 25 employees and annual sales of EUR 4 million. Operations in Germany were affected by flooding in 2018. Over 10,000 damages were reported in one month, and Polygon’s sales hit a record. The Wind Energy service area, introduced in 2017, continued to develop very strongly. The Polygonvatro Germany e-box, which collects energy data from customer sites and delivers it via the cloud into our systems, was implemented and 20,000 boxes were installed in Germany.

Austria In Austria, Polygon is one of the leading players in the market and has an ambition to grow. The plan is to launch Spark in Austria, the Netherlands and Finland during 2019. Due to weaker sales than expected, efficiency measures have been implemented.

Belgium Belgium is so far a fairly small market for Polygon, but we are a leading player in leak detection. The Field Ser-vice Management system was implemented at the end of 2017 and has contributed to the operations during 2018.

France To drive market consolidation and become a major French player, Polygon acquired in the end of December 2017 the company group Bretagne Assèchement, with 47 specialists and annual sales of EUR 5 million. The French operation have had strong development with increasing profit and a high growth since the acquisition. The market in France is mainly regional, and Polygon adapts its operations to this. We offer a wide range of services in the country and are particularly strong within leak detection.

The Netherlands In the Netherlands, Polygon is a full-service provider with strong development and several successful cross-border assignments. In 2018, Polygon became the first Dutch climate neutral property restoration company, accord-ing to the external agency the Climate Neutral Group.

NORTH AMERICAOn the North American continent, Polygon has presence in the United States and Canada. Operations in Singapore are also a part of this segment.

United States In the US, Polygon holds a strong position in temporary climate solutions and document restoration, and the development in 2018 was strong. The US operations focus on competitive, high-value solutions and have long been an established player, positioned as a solution provider. Just like in 2017, Polygon was called in after devastating hur-ricanes hit the country. In 2018, it was the south-west part of the country that was most severely affected (by hurricanes Florence and Michael). Polygon US stood close by its cus-tomers and supported those affected in property damage restoration projects by supplying the necessary drying capacity.

In our Centre of Excellence for Document Restoration in Allentown, Pennsylvania, we focus mainly on customers with outstanding requirements for high-quality expertise. This niche mainly includes universities, government bodies and cultural institutions. Our people are leading experts in their area, with a sterling reputation.

The development of prevention and monitoring services with the help of IoT solutions has come the furthest in the US, and the business works closely with Caption data.

Canada Polygon launched a franchise model in Canada three years ago. We have worked intensively with the offering to potential franchisees, and the Field Service Management system has increased service efficiency. Two new franchisees were successfully added in Quebec.

Singapore The operations in Singapore are dedicated to Temporary Climate Solutions for the marine industry, with focus on rental dehumidifiers for LNG tankers and oil and gas companies. During 2018, Polygon Singapore centred on broadening the customer base in the country and – potentially – in other parts of Pacific Asia.

Share of Group employees, 52% Share of Group employees, 4%Share of Group sales, 62%

CONTINENTAL EUROPE

Share of Group sales, 5%

NORTH AMERICA

POLYGON 2018 37

COUNTRIES AND REGIONS

Sustainability and a company’s impact on the climate are determining factors for customers today. This leads to increased demands from our stakeholders and new requirements, as well as possibilities, for us as a company. Polygon acknowledges the rapidly changing environment in the world around us and takes on its responsibility through Polygon’s Our Responsibility programme.

OUR RESPONSIBILITY PROGRAMME Polygon’s Our Responsibility programme aims at providing guidelines for us as a company to minimise risks, to safeguard our values and to act sustainably, responsibly and with respect for our customers, employees and society in general. The programme also goes hand in hand with our business model, the Polygon Model.

KEY SUSTAINABILITY AREASFirst-choice employer (Social)Employees are Polygon’s key resource. We employ close to 4,000 people in 13 countries. Their dedication and knowledge are crucial to our success. Our focus is always on the customer and on delivering our promise. We have an instinct to help, and we take responsibility with a clear accountability. This attitude is key to the success of our com-pany and ensures that Polygon is a first-choice employer.

Resource-efficient operations (Environmental)Restoration is our core business. We bring valuable property back to life. This limits the use of new materials and equip-ment, and reduces waste. In the end, our way of working decreases both environmental impact and cost.

Responsible business (Economic)It is our responsibility to conduct business using high ethical standards with respect towards individuals and society. We expect our people to lead by example with our values of Integrity, Excellence and Empathy as their guiding principles. To promote sound business practices and to act in an ethical way, we place great emphasis on implementing our Code of Conduct in our network of employees and partners.

SUSTAINABILITY RISKS AND OPPORTUNITIES TOWARDS A SUSTAINABLE OFFERINGWater, fire and climate all advance and threaten humanity. With the effects of climate change, the need and demand for Polygon’s services are likely to increase. In order to help our customers in the best ways possible, we continue to develop our solutions, services and partnerships in a more sustainable way.

RESPONSIBILITY IN A CHANGING ENVIRONMENT

OUR WAY OF WORKING DECREASES BOTH

ENVIRONMENTAL IMPACT AND COST.

POLYGON 201838

OUR RESPONSIBILITY

SOCIAL RESPONSIBILITY LEADS TO COMPETENT EMPLOYEESDuring the year, Polygon in Norway signed an agree-ment with Ripples in the Water, a joint venture of the Confederation of Norwegian Enterprise (NHO) to pro-mote the recruitment of people who have ended up outside the labour market. Polygon Bergen was the first one to hire a decontamination technician in April. Several more were soon to follow.

Ripples in the Water’s aim is to pair job seekers with the right company, and every year it helps over 1,500 people to find a permanent job.

“Polygon has an ambition to be an industry leader in social responsibility. We strive to take care of our employees, but also provide opportunities for those who, for some reason, encountered obstacles in their professional life. The initiative is mutually beneficial for both sides as Polygon gets access to new, skilled, motivated and loyal employees,” says Polygon AS HR Manager Jeanette Vannebo.

Polygon’s key resources are people, knowledge and technology – in that order. Our people always come first. The dedication and knowledge of our employees are crucial to our success, and we do everything to make their job easier. This is ensured by our simple organisation and flat structure, with clear accountability. Our focus is always on the customer. All according to the Polygon Model.

A DIVERSE WORKFORCE Polygon has close to 4,000 employees in 13 countries. Our business is diverse and so are our employees. Many come from the construction, real estate or plumbing industries. Some colleagues have academic degrees, while the vast majority are experienced practical technicians. Due to the nature of some of our jobs and tasks, we can offer employ-ment opportunities to people without formal education. We make certain that our employees get the proper training, knowledge and tools to perform their job.

ATTITUDE IS KEY We value experience and skills but, in the end, it is people with the right attitude who make a difference. Each day, we meet thousands of people whose properties have been damaged. Their lives have been severely disrupted, and we need to demonstrate genuine understanding of their situa-tion. This is crucial, especially since we, in most cases, work in people’s homes and in direct contact with them.

Each and every Polygon employee knows that we have to reassure our customers that their property will be restored in the best possible way and in the shortest time possible. Then we work to deliver on that promise. We have an instinct to help, and we take responsibility. We are able to make quick decisions to benefit our customers. This attitude is key to the success of our company.

OUR MISSION IS TO HELP We structure our operations in such a way that our employ-ees get the necessary support to help customers in the best and fastest way. Our organisation is simple and our structure is flat; it has been reduced from seven to only four layers in the past few years. The idea is clear: to be effective, our field specialists must be empowered to act independently when interacting with customers. We make sure that everyone has the right competence, information and tools to take deci-sions when needed, which is usually right away. In fact, this is something we track – in our most recent employee survey 91 percent said they feel empowered to make decisions when needed. Also, having the freedom to organise and control your own work decreases stress and increases motivation. Polygon’s flat structure also creates a sense of family. Our warm atmosphere makes people feel like they are among friends, which makes it easier to perform their job.

POLYGON ACADEMY – STRATEGIC TALENT MANAGEMENT WITHIN THE POLYGON GROUPLeading by example is one of the fundamental elements of the Polygon Model. The capabilities of Polygon’s leaders are key to keeping and developing the competence of our employees, and ultimately to the company’s results and suc-cess. We believe in our employees and in the company’s ability

FIRST-CHOICE EMPLOYER

POLYGON 201840

RESPONSIBILITY – SOCIAL

to empower them to grow as professionals. Consequently, our approach is to promote from within. In fact, some of our area managers and many unit managers began their Polygon career as technicians or team leaders.

The Polygon Academy is our own programme, designed to foster outstanding leaders. The Academy helps us identify and manage talent in a structured way. The core of the Polygon Academy is sharing knowledge and best practice as well as identifying new business opportunities. This way, expertise that already exists in our Group is unlocked, accelerating the implementation and execution of Polygon’s strategy. The Academy also provides opportunities for participants to build and expand their personal networks.

After completing the one-year training, they cascade what they have learnt into their own operations.

During 2018, the Polygon Academy was run for the third time. This year we focused on the acquired companies. The managers were introduced to the Polygon model and the training sessions were held in different Polygon countries. All sessions were led by Group and country management. The sessions included presentations and workshops that gave deeper insight into the Polygon Model.

POLYGON LEARNING ZONE Polygon’s ambition is to develop our people and make them grow. Local and centrally geared training programmes help them improve their skills and prepare them for more challeng-ing tasks. Clearly understanding your current job, and having the right conditions to perform it well, makes it easier to set and reach both individual and company targets.

Polygon’s professional development is focused on techni-cians, our main group of employees. Overall, our aim is to con-solidate all resources within the entire Group and make them accessible to everyone. We do this by developing the Polygon Learning Zone, our new learning management system. The purpose is to provide everybody with the right training and competence in a cost- and time-efficient way. The Polygon Learning Zone comprises all our education and training, with an emphasis on short learning blocks and e-learning. It has been rolled out in Norway, the UK, the Netherlands and the US.

Many Polygon employees also need mandatory external courses and certifications, for instance to be cleared to work with asbestos.

YOUNG TALENTS PROGRAMME LAUNCHED IN GERMANYThe management team at Polygon Germany is convinced that its employees are the most valuable part of the com-pany, as skilled and well-trained employees make a critical contribution to success. However, they experienced an increasing challenge to find adequate candidates for junior positions. That is why the Young Talents programme was launched in 2018, a training programme that is specifically designed to develop young talents and prepare them for a career within the Polygon Group.

Develop

Keep

AttractPaying for performance

Leading by example

Being a first-choice employer

Driving results

Hiring for attitude

Getting up to speed

Competency Framework

Ensuring sustainability

Growing capability

OUR APPROACH TO PEOPLE AND ORGANISATION

We continuously strive to attract people with both the right mindset and the right skills. We develop our people throughout their employment, and we have a strong focus on keeping high- performing individuals.

POLYGON 2018 41

Before the pilot was started in August, regional workshops were held to identify the major requirements. The programme consists of one trained instructor per branch and a supervisor for the programme. Monthly telephone meetings are held to coordinate progress and share best practice examples. Young Talent camps are also held to facilitate engagement and collect ideas for improvement from the talents.

An early learning in the process was that the branches needed more support than expected to implement the programme, which is why a support position through a Young Talents coordinator was established at the headquarters. In total, the programme was completed by 16 young talents, who provided thoroughly positive feedback. As the Young Talents pilot proved to be highly successful, the management team decided to roll out the programme to all branches in Germany in 2019.

ENGAGED EMPLOYEES To complement our everyday communication with our employees, a structured survey is conducted every year. It presents an opportunity for our people to express their views, wishes and concerns. All employees in all countries are invited to participate. The survey that was conducted in the beginning of 2018 was answered by 92 percent of the total staff. Considering all newly acquired companies also partici-pated in the survey, the response rate is remarkable. The benchmark is 82 percent. This demonstrates the importance our people ascribe to these issues.

The survey measures team efficiency, leadership, engage-ment and net promoter score (NPS, whether employees believe that Polygon is an attractive employer) in all units and teams. Polygon’s employee survey also captures several psycho social work environment indicators, such as respect among colleagues, cooperation, freedom of expression, feedback and conflict. On a local basis, additional questions can be included to capture any issues that require special attention.

The 2018 survey showed substantial progress: the number of highly engaged employees is the same as last year, feed-back from managers has improved and trust in management has increased. All indices display a positive trend over time: team efficiency is at 77 (76), leadership is at 78 (77) and engagement at 83 (82). eNPS has gone up from 9 to 11. Almost all results in the survey are above the industry bench-mark. The results help us further improve our way of working, at all levels. Teams follow up their survey results and perfor-mance compared to targets, review their current situation and set new targets.

DRIVING HEALTH AND SAFETY ISSUESWorking to save and recover our customers’ property is rewarding. At the same time, the sites where we work can be hazardous. We apply a structured approach to minimise risks and protect employees and other workers from injuries and accidents.

Particularly relevant to our business are personal protective equipment, clothing and air filtration to avoid exposure to harmful substances. We also prevent the spread of microbes and particles to the outside environment.

We continuously monitor sick leave in each country. Occupational injuries are monitored on a quarterly basis.

MANAGING HR IN A STRUCTURED WAYWhen we recruit, we focus on candidates’ personality and drive rather than on their exact formal education. Once peo-ple are on board, we bring them up to speed and train them. We also work to ensure continuity of our workforce and capabilities. In 2017, a Group-wide standard for onboarding was set. During 2018 the countries has continued to develop local activity plans for onboarding. Our selection of employ-ees places equal emphasis on attitude and formal qualifica-tions. We prioritise a fast and efficient induction process since the experiences of the initial period affect new employ-ees’ loyalty to the company.

To suit the needs of our decentralised business, our overall approach is to develop standards within the area of human resources (HR) at Group level. These standards outline our common base level. Polygon subsidiaries are able to adjust and develop them as they see fit.

POLYGON GERMANY KEEPS EMPLOYEES FITTo foster employees’ fitness and wellbeing, Polygon Germany decided to provide all employees with special benefits for the use of sport facilities. Employees can choose from a wide range of different sports like swimming, golfing, gyms and many more. Feedback from the staff has been vastly positive.

POLYGON UK AND IRELAND NAMED AS A GLOBAL LEADER IN PEOPLE MANAGEMENT PRACTICEPolygon UK and Ireland has been shortlisted in the Platinum Employer of the Year 250+ category in The Investors in People Awards 2018. The Awards celebrate the best people management practices amongst Investors in People accredited businesses. The 13 award categories recognise the organisations that have achieved the highest standards. There are a range of award categories, focusing on the key elements of what it means to be an Investor in People, from Excellence in Leadership and Management, to Excellence in Social Responsibility.

POLYGON 201842

RESPONSIBILITY – SOCIAL

OUR WORK IS A TEAM SPORTWhen a residential complex in Norway’s Fredrikshamn was subject to extensive water damage after heavy rainfall, Polygon Norway responded quickly but soon realised that the work was more extensive than they had resources for. Therefore, colleagues in the Polygon Group were asked for help.

Paw Larsen, Head of Department at Polygon in Copen-hagen in Denmark, received the inquiry and immedi-ately 15 of his people expressed enthusiasm to go to Norway and help.

“We decided to send a group of people the first week, and then exchange them with new colleagues in the second and third week,” Paw comments.

Only a couple of hours after the inquiry was received, the first Danish colleagues were on their way to Norway. As the work proceeded well, an unexpected problem occurred. After the first week, they had made so much progress that the Danish help was no longer needed.

Paw is certain that there will be more cross-border assignments in the future.

“An event like the one in Norway clearly shows the strength we have as an international group. This enables Polygon to quickly offer more resources than might be available locally. I usually say that our work is a team sport; every time you help a teammate, you also help yourself and the team as a whole,” says Paw Larsen.

RESOURCE-EFFICIENT OPERATIONS

Throughout the entire process of protecting and restoring value, we act responsibly in all relations and situations. Polygon has responsibility at heart. We bring valuable property back to life, decreasing both environmental impact and cost.

RESOURCE-EFFICIENT OPERATIONSOur job is to restore rather than replace damaged property. The fact that we do this, and the way we do it, saves resources and limits environmental impact.

At the same time, our a ctivities do affect the environ-ment. We have a vehicle fleet for service purposes. We use various equipment, materials and chemicals to restore buildings and inventory. In the end we are responsible for disposing whatever cannot be saved.

Polygon’s environmental efforts are centred around efficient use of materials, energy and other resources. We use non-destructive methods as far as possible. Environ-mental management is actively handled at the country level, taking national characteristics into consideration.

REDUCING FUEL USE AND CARBON DIOXIDE EMISSIONS Many Polygon subsidiaries are working on lowering their energy use and increasing energy efficiency.

For instance, Polygon UK is working to reduce fuel con-sumption since this comprises about 80 percent of the total energy usage. Polygon UK uses the Lightfoot system, which is a national initiative to reward cleaner, safer and cheaper driving. Engines are automatically shut off as soon a vehicle arrives at a customer and, while driving, a warning system issues an alert if the driver is not driving efficiently. As a result, fuel consumption has been reduced by about 44 per-cent since the beginning of 2014 (2018: average 8.2 l/ 100 km – 2014: 11.8 l/100 km), which translates into annual savings of about 975 tonnes of CO2 emissions. In total, about 3,000 tonnes of CO2 emissions and GBP 300,000 in fuel costs have been saved since the system was initiated in 2014.

Part of the Lightfoot project is a mapping tool that helps drivers to identify the optimal route to their customers, which further increases fuel efficiency.

Another example is that Polygon Germany installed speed limiting devices in all its transporters to lower fuel consump-tion and increase driver safety.

IDENTIFYING POLYGON’S CARBON FOOTPRINT During the year, Polygon initiated a project to identify the carbon footprint of the Group’s emissions. The project is a collaboration with students at the KTH Royal Institute of Technology in Stockholm. Once the results of the project are available, further strategic steps can be taken to lower carbon emissions.

POLYGON 201844

RESPONSIBILITY – ENVIRONMENTAL

POLYGON IN THE NETHERLANDS AN INDUSTRY LEADER IN SUSTAINABILITYPolygon is the first Dutch property restoration company to be climate neutral. Through calculating its carbon footprint, taking various measures to reduce CO2 emissions and investing in a durable climate project, Polygon Netherlands’ business operations are now climate neutral and verified by the external agency the Climate Neutral Group.

As a result, the business has also been nominated for a sustainability award in the Netherlands – the Rob Insinger Award, which is an initiative of insurance companies that aims at increasing sustainability in the damage industry.

Sustainability is part of Polygon Netherlands’ intrinsic motivation and Country President Marlies van der Meulen comments:

“Over the past years, we have taken steps to reduce our carbon emissions. For example, we replaced our fleet of cars with more sustainable vehicles, carried out in-house development of sustainable cleaning prod-ucts, developed better separation of project waste and saved energy in drying rooms. We have also been off-setting our remaining CO2 emissions through investing in a sustainable project for hydropower energy in India.”

Polygon in the Netherlands also has sustainable plans for the future, such as looking into the possibilities of circular economy in the restoration industry.

It is our responsibility to conduct business using high ethical standards, show respect towards individuals and society, and to use sustainable practices that contribute to a better environment. We expect our people to lead by example with our values of integrity, excellence and empathy as their core principles. The Polygon Model and our Code of Conduct guide our efforts.

OUR CODE OF CONDUCT IS OUR FOUNDATIONThe Polygon Code of Conduct outlines the main principles of our corporate responsibility, as well as the personal, ethical and professional principles that all Polygon employees should adhere to. These principles guide our relations with Polygon colleagues as well as with customers, suppliers, society and shareholders.

FRAMEWORK FOR IMPLEMENTATION Polygon uses a Group-wide framework, Our Responsibility, to implement the Polygon Code of Conduct. Apart from the Code, Our Responsibility consists of various guidelines, e-learning programmes and a values game. In addition, there is a gift register and an integrity phoneline to ensure ethical business conduct. While Our Responsibility is a unified approach, it allows room for adaptation to local legislation and conditions. Each tool is available in the languages spoken in our countries of operation.

“Our Code of Conduct outlines the ethical stance we take towards each other and in our business activities. Our business model is also designed to guarantee that we take ethical responsibility in everything we do, in combination with sustainable financial development.” – Maria Wallin, Group Business Controller and Compliance Officer.

BOOSTING COMPLIANCE The Polygon Code of Conduct rests on the principle that every employee is responsible for his/her own professional behaviour. Code of Conduct implementation is monitored by Polygon’s HR function. During 2017, we began rolling out an e-learning course covering our Code of Conduct and the implementation continued during 2018. The course helps employees learn about the Code and includes a test and confirmation that they understand and comply with the Code of Conduct.

Polygon took several other steps to promote compliance with internal and external rules and regulations. We contin-ued to roll out Fair Competition, our anti-corruption and anti-trust policy, and to secure Polygon regarding compli-ance with GDPR.

We have also launched inspirational films that feature examples of how we address sustainability in various parts of Polygon.

POLYGON UK ACHIEVES GREEN COMPANY STATUS IN ACHILLES ACCREDITATIONAchilles is a supply chain audit standard focused on providing insight on risk mitigation, sustainability and business per-formance, and is relied on by safety-critical industries and governments worldwide. Polygon UK achieved an outstand-ing 100 percent score after rigorous audit across all four key sectors: corporate social responsibility (CSR); health and safety; environmental and quality.

The Green Company status is a great recognition of Polygon’s continuous improvement and acknowledges the importance with which we view our responsibilities, including our duty of care to serve customers safely, economically and to the highest environment standards.

The award gives Polygon UK increased opportunities to collaborate with specialist businesses around the country, develop innovation and address industry challenges to bene-fit supply-chain practice.

RESPONSIBLE BUSINESS

POLYGON 201846

RESPONSIBILITY – ECONOMIC

EMPLOYEES PER GEOGRAPHICAL SEGMENT 31 DECEMBER 2018

SegmentNumber of employees

Of whom men, %

Nordics and UK 1,692 80Continental Europe 1,973 78North America 145 78Total 3,810 79

AGE DISTRIBUTION

Age %< 40 4941–50 2851–60 20> 60 3Total 100

EMPLOYEE STATISTICS

2018 2017 2016Work attendance, % 94.0 96.0 96.4Employee turnover rate, % 28.0 18.4 18.4Average number of employees 3,836 3,279 2,909Of whom men, % 79 79 79

EMPLOYEE SATISFACTION

2018 2017 2016Response rate, % 92 91 94Team Efficiency Index (ESI) (BM 72) 77 76 76Leadership index (LSI) (BM 77) 78 77 77Engagement index (BM 72) 83 83 82

FINANCIAL KEY FIGURES

2018 2017 2016Sales, MEUR 619.3 512.4 485.3Adjusted operating profit (EBITA), MEUR 39.6 33.0 32.1Adjusted operating margin (EBITA), % 6.4 6.4 6.6

KEY FIGURES

70.0%Proportion of operations environmentally

certified per ISO 14001

77.0%Proportion of operations environmentally

certified per ISO 9001

POLYGON 2018 47

RESPONSIBILITY –KEY FIGURES

ACTIVE RISK MANAGEMENT MINIMISES RISKS

As a decentralised company with operations in 13 countries, Polygon faces internal and external risks that may impact the ability to achieve strategic objectives and financial targets. Successful risk mitigation creates opportunities and competi-tive advantages. Although we cannot prevent external risks, we strive to work preventively to be prepared for different scenarios.

The board of directors has the overall responsibility for risk management while the operational work is delegated to the CEO, Group management and country presidents.

Effective risk management starts with identifying the risks, effects and probabilities of each of these risks. Polygon manages risks through an active risk management process based on risk identification, risk evaluation, risk handling and follow-up and evaluation. The process starts with each country annually identifying and evaluating its most signifi-cant risks using a Group-wide risk form. Group management then identifies and evaluates the most significant risks at Group level. The Group risk assessment is presented to the audit committee and the board on a yearly basis.

RISK CATEGORIES AND RANKINGDuring 2018, Polygon has conducted a thorough risk evalua-tion process, ranking all risks based on probability and impact. The general identified risks (there could be other specific risks at local level) according to the Polygon Model are:

• Financial• Operational• Contract and

assignment

• IT• Sustainability • Governance• Branding

RISK MANAGEMENT PROCESS

FOLLOW UP AND EVALUATION

RISK HANDLING

RIS K I DENTIFICATION

RI SK EVALUATI ON

POLYGON 201848

RISK AND RISK MANAGEMENT

Rank Risk category – risk name Risk description Risk management

1 Business risk – IT risk

Polygon is dependent on IT to manage critical business processes, including administrative functions and the protection of personal data.

Service-level agreements (SLA) with IT suppliers ensuring the quality of outsourcing partners. Policies for IT and IT security are implemented, and audits are conducted regularly.

2 Business risk – Dependency on key employees

Polygon is dependent on the skills, experience and commitment of a number of key employees. An inability to attract and retain new key employees may harm business development.

Employee satisfaction surveys are conducted yearly. Implementation of strong corporate culture through the Polygon Model and investments in knowledge transfer, employer branding and employee development through the Polygon AcademyHR policies to ensure common handling of HR issues.

3 Business risk – Acquisitions and integration

Mergers and acquisitions may incur risks relating to integration, separation, retention of key employees, misjudged forecasts regarding financial results and failure to realise expected synergies.

Due diligence routines and defined acquisition process at Group level, including mandatory integration plan, regular follow-ups and reviews.

4 Business risk – Anti-competitive behaviours

The construction industry is associated with high risk relating to anti-corruption and bribery.

The Code of Conduct, which applies to all employees, prohibits any form of corruption, fraud, bribery or money laundering. Internal training in anti-corruption, anti-trust and the Polygon Model is conducted regularly.Procurement and authorisation policies aim to secure good governance. In 2019, a Code of Conduct for business partners will be rolled out.

5 Strategic risk – Global economic and market conditions

Global economic development affects demand from existing and potential customers. Sustained economic downturn or loss of consumer confidence could trigger a decrease in demand for Polygon’s services.

The risk is mitigated thanks to globally spread business, workforce flexibility, activities and strategic planning, and monitoring.

6 Business risk – Customer risk

Dependency on key customers (insurance companies). Mutually beneficial relationships must be maintained.

Strong key account and customer relationship management. Customer satisfaction surveys are conducted regularly. Clear focus on quality of service and development of new solutions and on expanding the customer base.

7 Business risk – Legislation

Failure to comply with legislation and regulations or personal data rules may result in loss of business, fines or sanctions. Compliance sometimes requires quick adaptation to changes.

Regular reviews with external experts for monitoring and evaluation of legislative and regulatory changes that affect Polygon.Timely implementation of changes in policies and roll-out via internal training. Back-to-back protection for handling of personal data by sub-contractors.

8 Financial risk – Currency translation risk

Polygon has global operations and is exposed to the financial effects of currency fluctuations when operations’ other functional currencies are translated into EUR at then-applicable exchange rates. Changes in currency exchange rates may have an adverse effect on the consolidated income statement, balance sheet and cash flow. Currency translation could also result in significant changes to the carrying value of assets, liabilities and equity.

Aside from EUR, functional currencies include GBP, NOK, SEK, USD, DKK, CAD and SGD. The main currency risks are related to GBP, NOK and USD.Intercompany loans reduce the currency risk, but cash flows for the non-EUR countries are currently not hedged. The income statement is re-evaluated each month to ensure correct business decisions.

9 Strategic risk – The issuer's dependency on other companies within the Group

Polygon AB, as issuer, is a holding company with great dependency on the success/result of other Group companies.

Ensuring efficient and stable Group structure – the current structure is pledged to a large extent regarding the loan structure. Monitoring of changes in local legislation and prevention of impact of these changes.

10 Financial risk – Goodwill

The Group carries goodwill on its balance sheet and, unless business units perform in line with forecasts, there is a risk of goodwill impairment and non-cash impairment charges.

Reporting, reviews, follow-up and action plans if necessary.

The ten most important risks in 2018 when it comes to probability and impact are listed in the table below.

POLYGON 2018 49

RISK AND RISK MANAGEMENT

COUNTRY PRESIDENTS

ROBERT BERMOSERAustriaJoined Polygon 2011Country president from January 1, 2018.

CARLA SLAETSBelgiumJoined Polygon 2012

FABIO BERNARDOCanadaJoined Polygon 1999

TOM JAATINENFinlandWill join Polygon 2019

YASSINE BEN HAMOUDA DenmarkJoined Polygon 2017Country president since January 4, 2018Member of the extended Group Management.

JULIEN MEYNIELFranceJoined Polygon 2006

POLYGON 201850

COUNTRY PRESIDENTS

JEREMY SYKESUnited KingdomJoined Polygon 2009Member of the extended Group Management.

KAI ANDERSENNorwayJoined Polygon 2015

ANDREAS WEBERGermanyJoined Polygon 2011 (founded VATRO 1992)Member of the extended Group Management.

MARLIES VAN DER MEULENNetherlandsJoined Polygon 2014

THOMAS PERMANSwedenJoined Polygon 2014

FRANK DOBOSZUSAJoined Polygon 2008

L.Y. ANGSingaporeJoined Polygon 1996

POLYGON 2018 51

COUNTRY PRESIDENTS

ADMINISTRATION REPORT 54

CORPORATE GOVERNANCE REPORT 57

CONSOLIDATED FINANCIAL STATEMENTS 62Consolidated income statement 62Consolidated statement of other comprehensive income 62Consolidated balance sheet 63Consolidated statement of cash flows 64Consolidated statement of changes in equity 65

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 66Note 1 Corporate information 66Note 2 Accounting policies for the consolidated

financial statements 66Note 2.1 Significant accounting policies 66Note 2.2 Changes in accounting policies 67Note 2.3 Summary of key accounting policies 69Note 2.4 Key accounting assessments, estimates

and assumptions 72Note 3 Business combinations 73Note 4 Divested operations 73Note 5 Segment information 74Note 6 Breakdown of expenses by category 74Note 7 Audit fees 75Note 8 Salaries, social security expenses

and employee benefits 75Note 9 Financial income and expenses 76Note 10 Tax 76Note 11 Goodwill 77Note 12 Other intangible assets 78Note 13 Impairment testing of goodwill

and trademarks 78Note 14 Property, plant and equipment 79Note 15 Contract assets and liabilities 79Note 16 Prepaid expenses and accrued income 79Note 17 Financial instruments and financial risk

management 80Note 18 Interest-bearing loans and borrowings 81Note 19 Cash and bank balances 82Note 20 Accounts receivable 82Note 21 Pledged assets for own liabilities

and provisions 83Note 22 Finance and operating leases 83Note 23 Other liabilities 83Note 24 Equity 83Note 25 Pension provisions 83

Note 26 Accrued expenses and deferred income 85Note 27 Contingent liabilities 85Note 28 Changes in financial liabilities 85Note 29 Related party transactions

and list of Group companies 86Note 30 Reconciling items between profit

before tax and net cash flow 86Note 31 Significant events after the end

of the financial year 87Note 32 Five-year overview 87Note 33 Alternative performance measures 88Note 34 Definitions 88

PARENT COMPANY FINANCIAL STATEMENTS 89Parent Company income statement 89Parent Company statement of other comprehensive income 89Parent Company balance sheet 90Parent Company statement of cash flows 91Parent Company statement of changes in equity 91

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS 92Note 1 Basis of presentation 92Note 2 Breakdown of sales 92Note 3 Salaries, remuneration to employees

and other fees 92Note 4 Audit fees 92Note 5 Other operating expenses 92Note 6 Interest income and interest expenses 92Note 7 Appropriations 92Note 8 Tax 93Note 9 Participations in Group companies 93Note 10 Non-current receivables

from Group companies 93Note 11 Non-current financial liabilities 93Note 12 Accrued expenses and deferred income 94Note 13 Pledged assets 94Note 14 Reconciling items between profit

before tax and net cash flow 94Note 15 Related party transactions 94Note 16 Proposed appropriation of earnings 94Note 17 Significant events after the end

of the financial year 94

SIGNATURES OF THE BOARD OF DIRECTORS AND THE CEO 95

AUDITOR’S REPORT 96

CONTENTS

ADMINISTRATION REPORT

The Board of Directors and the CEO of Polygon AB (publ), corporate identity number 556816-5855, hereby present the Annual Report and consolidated financial statements for the 2018 financial year. OPERATIONSPolygon AB and its subsidiaries perform services primarily in the area of water and fire damage restoration and also offer other services such as temporary climate solutions, leak detection and moisture investigations.

Polygon’s customers are insurance companies as well as commercial and private property owners. The Polygon Group conducts business in Europe, North America and Asia and has a strong local presence through its approximately 300 service depots. Polygon creates value by minimising costs for the extent of the damage and through its rapid response as well as through professional and secure claims processing on behalf of the insured using efficient technology.

The Polygon Group consists of the Parent Company Polygon AB, which was formed on 12 July 2010, and 27 (28) subsidiaries. All subsidiaries are fully owned, except Polygon A/S in Denmark, where 33.6 % of the shares are owned by non-controlling interests. The Group was estab-lished at the end of September 2010 when Triton Fund III, via Polygon AB, acquired 100 % of the shares in Munters’ Moisture Control Services (MCS) division from the then listed company Munters AB.

OWNERSHIP STRUCTUREPolygon AB is wholly owned by Polygon Holding AB, of which 83.83 % is in turn owned by MUHA No 2 LuxCo S.à.r.l.

2018 FINANCIAL YEARConsolidated sales for the financial year amounted to EUR 619.3 million (512.4) and operating profit to EUR 25.3 million (25.4). Operating profit was charged with items affecting comparability of EUR 7.7 million (2.9).

2018 2017

EBIT (operating profit) 25.3 25.4Depreciation and amortisation of assets in connection with acquisitions 6.6 4.7Items affecting comparability 7.7 2.9

Adjusted EBITA 39.6 33.0Adjusted EBITA margin, % 6.4 6.4Depreciation of property, plant and equipment 13.4 10.0

Adjusted EBITDA 53.0 43.0Adjusted EBITDA margin, % 8.6 8.4

Consolidated sales increased 20.8 % compared with the preceding year, of which 7.4 % was attributable to organic growth and 11.4 % to acquired companies and operations. Translation effects had a negative impact of 0.8 % on sales.

Operating profit adjusted for items affecting compara bility (EBITA) increased 20 % compared with the preceding year and was impacted positively in all business segments, particularly in Nordics & UK, which increased 40 % mainly due to major acquisitions and a strong performance in the UK.

During the year, the Group conducted six major acquisi-tions and a small number of minor acquisitions of assets and liabilities; see Note 3 Business combinations.

PolygonVatro GmbH acquired Von Der Lieck GmbH & Co (VDL) in October 2017 and the acquisition was closed on 2 January 2018. VDL strengthened Polygon’s position in the western region of Germany, close to the Dutch border.

Polygon A/S in Denmark acquired the shares of Dansk Bygningskontrol A/S (DB) and the acquisition was closed on 4 January 2018. After a directed equity issue in Polygon A/S to the former owners of DB, Polygon’s participating interest in the Danish subgroup amounts to 66.4 %. The acquisition strengthened Polygon’s position in Denmark since DB was three times larger than the existing operations in Denmark on the acquisition date. The acquisition is expected to gene-rate synergies between the two companies in Denmark and result in a significantly more efficient organisation.

In January 2018, Polygon AS in Norway acquired minority shares in four franchise partners, with a call option to increase the ownership to 100 %. In early July 2018, this call option was exercised for two of these companies: Buskerud Skadebegrensning AS and Kongsberg AS. Both companies were merged with Polygon AS during the autumn.

Polygon Sverige AB acquired 100 % of the shares in Refix Skadesanering AB and the acquisition was closed on 1 October 2018. The acquisition strengthened Polygon Sverige’s position in fire damage restoration.

Polygon UK acquired 100% of the shares in Neways Property Care and the acquisition was closed on 3 October 2018. The acquisition has enabled Polygon UK to offer a full-service concept in the area of property damage repair and restoration.

Polygon Sverige conducted two minor acquisitions of assets and liabilities during the financial year (Metodia AB and Caliber Sanering AB).

At the beginning of the financial year, Polygon Inter-national AB acquired a minority interest in Caption Data Ltd (CDL) in the UK. The acquisition provided Polygon with an opportunity to influence and participate in digitalisation of the industry, since CDL is a world leader in the development of remote monitoring applications, such as solutions for moisture control.

No operations or companies were divested during the year.

POLYGON 201854


Items affecting comparability comprise the following expenses (revenue):

2018 2017

Acquisition costs –0.9 –1.5 Restructuring –4.2 –4.0 Impairment of IT systems and property, plant and equipment –1.9 –0.6

Negative goodwill in Norway –0.7 4.0

Other –0.0 –0.8

Total –7.7 –2.9

In December 2018 at an Extraordinary General Meeting, it was decided that Luc Hendriks, Lars-Ove Håkansson and Ole Skov would leave and that Lars Blecko will join Board of Directors. Nadia Meier-Kirner was elected as Chairman of the Board at the same general meeting.

FINANCING AND LIQUIDITYAt the beginning of February 2018, Polygon AB issued a EUR 210 million covered bond, with a possibility to issue sub-sequent notes. The bond, which matures in February 2023, bears a fixed interest rate of 4 % per annum. The bond is listed on the Corporate Bond List of NASDAQ OMX in Stockholm.

The proceeds from the new bond were used to redeem an earlier bond of EUR 180 million and to cover other liquidity requirements, including acquisitions.

Cash and cash equivalents at 31 December 2018 amounted to EUR 33.2 million (42.5). Cash flow from operating activities in 2018 was EUR 31.2 million (40.7). The deteriorating cash flow compared to the previous year is mainly affected by the acquisitions made during the year in which the operational processes in acquired companies take time to streamline. Strong growth with high activity level in the existing business, especially in Germany, has also had a negative impact on cash flow.

CAPITAL EXPENDITURESThe Group’s capital expenditure on property, plant and equipment for the period amounted to EUR 16.3 million (16.9). In addition, the Group upgraded its IT systems for EUR 1.8 million (2.4). Total depreciation and amortisation during the period amounted to EUR 20.0 million (14.7), of which EUR 11.3 million (9.3) pertained to depreciation of property, plant and equipment and EUR 8.7 million (5.4) to amortisa-tion of intangible assets.

Amortisation of intangible assets mainly refers to cus-tomer relationships acquired in business combinations as well as amortisation of capitalised costs for development of the Group’s IT systems. During the year, intangible assets were impaired by EUR 1.9 million (0.5). The write down is mainly development costs for internal IT systems that are in use and amounts to EUR 1,8 (0,5) million.

EMPLOYEESThe average number of employees in the Group during 2018 was 3,836 (3,279).

For more information, see Note 8 Salaries, social security expenses and employee benefits.

SIGNIFICANT RISKS AND UNCERTAINTIES AND RISK MANAGEMENTPolygon is a leader in quality and technology, with a strong brand and a comprehensive service offering. The Group’s strength lies in its broad local presence in geographically dispersed markets and flexible cost structure. The risks faced by the Group consist of variations in revenue resulting from changes in the weather and temperature, and the related damage frequency. The Group’s operations also have exten-sive exposure to the insurance industry, which leads to a mutual dependency.

Competition comes from a few global operators, but mainly from a large number of local players.

RisksPolygon is exposed to a number of risks: market risk (primarily currency risk and interest rate risk), credit risk, liquidity risk and operational risks.

Currency riskThe Group’s currency exposure is divided into transaction exposure (exposure in foreign currency related to contrac-tual cash flows) and translation exposure (equity in foreign subsidiaries). The Group’s currency exposure arises from inter-company financing and from translation of the income statements and balance sheets of foreign subsidiaries to the Group’s reporting currency (EUR). At year-end, the company had SEK/EUR hedges to cover the head office’s costs.

Currency risk refers the risk of changes in foreign exchange rates that could negatively affect the Group’s earnings. The Group’s transaction exposure is considered low since the extent of the flows between currency zones is lim-ited. The Group’s translation exposure relates primarily to translation from Swedish kronor (SEK), Danish kroner (DKK), Norwegian kroner (NOK), Canadian dollars (CAD), US dollars (USD) and British pounds (GBP).

Interest rate riskInterest rate risk refers to the risk of changes in market interest rates that could affect cash flow, earnings and/or the fair value of financial assets and liabilities. At year-end, the Group had no hedging products to minimise its interest exposure.

Liquidity riskLiquidity risk refers to risk that the Group will be unable to meet its short-term payment obligations. The Group carries out continuous liquidity monitoring and forecasts to manage the liquidity fluctuations that are expected to arise. At 31 December 2018, the Group had EUR 69.1 million (60.9) in unutilised loan commitments, for which all covenants have been met.

POLYGON 2018 55


Credit riskCredit risk refers to the risk that the counterparty in a trans-action will not fulfil its obligations under the agreement and that any collateral will not cover the Group’s receivable. For commercial counterparties where the Group has a large exposure, an individual credit assessment is carried out. The Group also works regularly to shorten the effective credit period.

Credit risk is limited, since no individual customer accounts for more than 5 % of the Group’s total revenue, meaning that credit risk is dispersed both geographically and among a large number of customers. For further information, see Note 17 Financial instruments and financial risk manage-ment.

Operational riskPolygon’s operations are characterised by a low dependency on individual customers combined with strong relationships with large insurance companies. These key partners account for approximately two thirds of the company’s business operations. Polygon is dependent on maintaining and developing strong relationships with these partners as well as ensuring the operation, security and development of the Group’s business-critical IT systems.

PARENT COMPANYPolygon AB’s operations include joint Group functions as well as ownership and management of shares in Group compa-nies. Polygon AB had four employees (three) during the year. No investments were made during 2018. The Group posted a loss before tax of EUR 4.7 million (loss: 7.4). The change in earnings is mainly due to higher items affecting comparability in 2018 related to the change of CEO and financial non- recurring costs when the previous covered bond of EUR 180 million was redeemed and replaced by a covered bond of EUR 210 million in early February 2018, which was offset by the fact that net Group contributions received increased EUR 6.4 million compared with the preceding year.

Cash and cash equivalents in the Group’s cash pool amounted to EUR 44.3 million (26.2) at the end of the period. The Parent Company’s assets amounted to EUR 305.3 million (279.4) and equity to EUR 93.4 million (97.5).

EVENTS AFTER THE END OF THE YEARIn January 2019, Polygon Nederland BV acquired the compa-nies Tiedema Lekdetectie BV and Teidema Droogtechniek BV and the acquisitions were closed immediately. The acquisi-tions strengthened Polygon’s position in leak detection and temporary climate solutions in the Netherlands.

On 1 March 2019, Polygon International AB acquired Alvisa 24 Holding AG in Switzerland and the acquisition was closed immediately. The acquisition enabled Polygon to expand its operations to include an additional country in Europe, creating new opportunities for cooperation and efficiency enhancement.

For more information, see Note 31 Significant events after the end of the financial year.

FUTURE OUTLOOKPolygon is continuing to work according to its strategic plans, with a focus on strengthening its market positions through organic growth, acquisition-driven growth and efficiency optimisation.

RESEARCH AND DEVELOPMENTThe Group’s development work primarily focuses on services, including investments in the digitalisation and development of the service delivery process. The acquisition of a minority interest in Caption Data Ltd (CDL) in the UK in February 2018 is a good example of this. This acquisition provided Polygon with an opportunity to influence and participate in the digitalisation of the industry, since CDL is a leader in the development of remote monitoring applications, such as solutions for moisture control.

The development work is mainly conducted as an inte-grated part of daily operations and development costs are recognised directly in profit or loss under operating expenses.

SUSTAINABILITY REPORT IN ACCORDANCE WITH THE SWEDISH ANNUAL ACCOUNTS ACTAccording to Chapter 6, Sections 10–14 of the Swedish Annual Accounts Act, large companies are required to pre-pare a sustainability report for financial years starting after 31 December 2016. This sustainability report is to contain the sustainability disclosures required to provide an accurate understanding of the company’s development, position and earnings and the impact of the operations, including disclo-sures concerning environmental issues, social conditions, employees, respect for human rights and anti-corruption measures. The sustainability report was submitted to the company’s auditors on the same date as the Annual Report and is presented on pages 38–47 of the annual review.

CORPORATE GOVERNANCE REPORTIn accordance with Chapter 6, Section 8 of the Swedish Annual Accounts Act, the Group’s corporate governance report is published separately from the administration report.

PROPOSED APPROPRIATION OF EARNINGSProposed appropriation of the Parent Company’s earnings:

The Board of Directors and the CEO propose that the loss for the year of EUR 4,154,822, together with retained earnings of EUR 97,490,955, amounting to a total of EUR 93,336,133, be carried forward.

No Group contributions or dividends were paid to Polygon Holding AB in 2018 or 2017. Nor did Polygon AB receive any shareholder contributions from Polygon Holding AB in 2018 or 2017.

POLYGON 201856


CORPORATE GOVERNANCE REPORT

Polygon is to be governed in a manner characterised by long-term sustainability for the shareholders as well as for the Group’s employees, customers, suppliers and other stakehold-ers. This demands clearly defined goals, guidelines and strate-gies as well as compliance with the company’s principles with regard to the environment, human rights, ethics and transpar-ency. The purpose of this report is to describe the rules, guide-lines, laws and policies under which Polygon is governed, the division of responsibility within the company and the way in which its decision-making bodies – the Annual General Meet-ing, the Board of Directors and the CEO – act and interact.

As of the 2014 financial year, the Board of Polygon AB (publ) prepares a statutory corporate governance report in accor-dance with Chapter 6 of the Swedish Annual Accounts Act.

CORPORATE GOVERNANCE STRUCTUREPolygon AB is a Swedish public limited company domiciled in Stockholm. Through its subsidiaries, the company conducts consulting and service operations in the area of water and fire damage restoration. The company’s mission is to prevent, control and alleviate the effects of water, fire and climate damage. Governance and control of the company are regu-lated by a combination of written rules and standard practice. These rules refer mainly to the Swedish Companies Act and the Swedish Annual Accounts Act, but also the Swedish Corporate Governance Code and the rules applicable in the regulated market where the company’s bonds are traded. Polygon AB’s bonds have been listed on the Corporate Bond List of NASDAQ OMX in Stockholm since 2014.

SHARE CAPITAL AND SHAREHOLDERSPolygon AB has 5,600 shares outstanding. Each share entitles the holder to one vote. There are no restrictions on the number of shares a shareholder may represent at the Annual General Meeting.

Polygon AB is a wholly owned subsidiary of Polygon Holding AB, of which 83.83% is in turn owned by MuHa No 2 LuxCo S.à.r.l.

GENERAL MEETING OF SHAREHOLDERSThe general meeting of shareholders is the company’s highest decision-making body. At a general meeting, the shareholders exercise their voting rights by electing the company’s Board of Directors and auditors and passing resolutions on guidelines for remuneration to the company’s Board of Directors, man-agement and auditors. When appropriate, the general meeting of shareholders also passes resolutions regarding the Articles of Association, dividends and changes in the share capital. The general meeting of shareholders that is held within six months after the end of the financial year also resolves on the adop-tion of the income statement and balance sheet, the disposi-tion of earnings and discharge from liability for the Board of Directors and the CEO. There are no restrictions on the num-ber of votes each shareholder may exercise at a general meet-ing. The general meeting of shareholders has not authorised the Board to issue shares or acquire treasury shares.

BOARD OF DIRECTORSDuring the year, the Board of Directors comprised seven members: Luc Hendriks (Chairman), Petter Darin, Lars-Ove Håkansson, Nadia Meier-Kirner, Jonas Samuelson, Ole Skov and Gunilla Andersson. At an extraordinary general meeting in late December 2018, Lars Blecko was elected to the Board and Luc Hendriks, Lars-Ove Håkansson and Ole Skov stepped down from the Board. Nadia Meier-Kirner was elected as Chairman. For further information about the Board members, including experience, education and other assignments, refer to page 60.

WORK AND RESPONSIBILITIES OF THE BOARDThe Board Chairman oversees the work of the Board and has special responsibility for monitoring the company’s develop-ment between Board meetings and ensuring that the

Name Position Elected Audit committeeIndependent in relation to shareholders

Independent in relation to the company and management

Attendance at Board meetings

Luc Hendriks Chairman* 2015 No Yes 6/6

Petter Darin Member 2015 Member No Yes 5/6

Lars-Ove Håkansson Member 2015 Yes Yes 5/6

Nadia Meier-Kirner Member/Chairman* 2017 No Yes 6/6

Jonas Samuelson Member 2010 Chairman Yes Yes 6/6

Ole Skov Member 2016 Yes Yes 6/6

Gunilla Andersson Member 2017 Yes Yes 5/6

* At an extraordinary general meeting in December 2018, Luc Hendriks stepped down from the Board and Naida Meier-Kirner was elected as the new Chairman of the Board.

Board of Directors

Management

Operational control

Auditors

General meeting of shareholders Audit committee

POLYGON 2018 57


members of the Board are continuously provided with the information required to satisfactorily discharge their duties. During the financial year, the Board held six scheduled meetings, one of which was a statutory meeting in conjunc-tion with the Annual General Meeting. In addition to these meetings, a number of meetings were held by circulation.

The work of the Board is governed by rules of procedure that are adopted annually. The rules of procedure stipulate the distribution of duties between the Board and manage-ment, the responsibilities of the Board Chairman and the CEO, and the procedures for financial reporting.

INDEPENDENCE OF THE BOARDAll members of the Board are independent in relation to the company. Furthermore, four members of Board are consid-ered independent in relation the owner of the company. The CEO is not a member of the Board but participates in Board meetings in the capacity of rapporteur.

AUDIT COMMITTEEThe Board has appointed an audit committee whose task is to analyse and discuss the company’s risk management and con-trol, and to ensure compliance with the established principles for financial reporting and internal control. The committee formulates guidelines for the company’s financial reporting and monitoring, and has decision-making authority in matters related to internal control. The audit committee maintains contact with the company’s auditors in order to plan the focus and scope of the audit work. The management audit that is performed by the company’s auditors every autumn is based on the risk and materiality analysis compiled by the auditors. In connection with the annual closing of the books, the compa-ny’s auditors report their observations from the audit and their assessment of the company’s internal control. During the year, the audit committee comprised two Board members. The committee held seven meetings during the year. These meet-ings were also attended by the company’s CFO and auditors who reported on specific items on the agenda.

AUDITORSAt the 2018 Annual General Meeting, the registered public auditing firm Ernst & Young AB was re-elected as the

company’s auditors. Auditor in Charge is Staffan Landén, who is an Authorised Public Accountant and the elected auditor of Vattenfall, Alfa Laval, Semcon and Nederman, among others. In addition, Staffan Landén has been appointed as a stock market auditor by NASDAQ OMX in Stockholm. The auditors’ independent status is ensured by the auditing firm’s internal guidelines. This independence has been confirmed to the audit committee.

CEO AND GROUP MANAGEMENTA new CEO, Axel Gränitz, was appointed in September and replaced Erik Jan Janssen on 15 October 2018; for further information, refer to page 61.

The CEO and Group management formulate and execute Polygon’s overarching strategies and address matters related to acquisitions, divestments and major investments. Such matters are prepared by Group management for resolution by the Board of the Parent Company. The President and CEO is responsible for the daily administration of the company in accordance with the decisions of the Board and the instruc-tions of the CEO.

The Group’s management team comprises the CEO, COO, CCO and CFO. Group management comprises the Group’s management team as well as three presidents from the Group’s subsidiaries, bringing the total number of senior executives in the Group to seven.

OPERATIONAL CONTROLThe CEO is responsible for the operational control of the Group. Polygon AB’s organisation is decentralised. This is a deliberate, strategic choice motivated by the fact that the business is normally local in nature and a conviction that the best decisions are made locally. The Group’s commercial organisation is based on decentralisation of responsibilities and powers in combination with an efficient and effective reporting and control system. In the subsidiaries, there are written instructions for the respective presidents. The opera-tions of the subsidiaries are also regulated by a number of Group policies and instructions. The Code of Conduct is an example of such a document.

A large part of the communication and discussions within the Group is based on the internal financial reporting. Local

NORDICS & UK

NORTH AMERICACONTINENTAL EQUROPE

UKJ. Sykes

CFOM. Norberg

FinlandT. Jaatinen

DenmarkY. Hamouda

CCO & Deputy CEO

J. Granath

CEOA. Gränitz

SwedenT. Perman

COOC. Kohl

NorwayK. Andersen

AustriaR. Bermoser

FranceJ. Meyniel

NetherlandsM. v d Meulen

GermanyA. Weber

CanadaF. Bernardo

BelgiumC. Slaets

USAF. Dobosz

SingaporeL. Yew Ang

POLYGON 201858


accounts are prepared on a monthly basis for each internal profit centre consolidated accounts. Aside from the income statement and balance sheet, the monthly accounts contain key performance measures and other relevant data. In con-nection with the monthly accounts, meetings are held with the subsidiary management teams.

In connection with the monthly closing of the books, meetings are held with the subsidiaries. The Group presents its financial statements to the market on a quarterly basis.

INTERNAL CONTROLIn accordance with the Swedish Companies Act, the Board of Directors is responsible for the company’s internal control with respect to the company’s financial reporting.

Internal control with respect to financial reporting is designed to ensure reasonable assurance and reliability in the company’s external financial reporting, which comprises the annual report and interim reports. This internal control is also designed to provide reasonable assurance that the financial reporting is prepared in accordance with the applicable laws and accounting standards. In accordance with the rules of procedure for the Board, the Board plans a review of the company’s internal control once a year.

Control environmentThe control environment, which determines individual and collective behaviour within the Group, is defined by the governing documents and is realised through an organisa-tional structure with clearly defined roles and responsibilities. The segregation and delegation of responsibilities have been documented and communicated in internal documents, including the rules of procedure for the Board, instructions for the CEO, order of delegation, order of authorisation and other internal control documents, such as the Code of Conduct, anti-corruption policy, money laundering policy, finance policy, investment policy, finance manual, etc.

Governing documents are prepared and evaluated on an ongoing basis by management and the Group policy is approved by the Board of Directors.

Risk assessmentAn annual risk assessment is carried out to identify risks and measures to counteract these risks. The Board has overall responsibility for risk management, while operational respon-sibility is delegated to the CEO, Group management and the president in each country. Effective risk management begins with identifying the risks as well as their probability and the consequence of each risk. Polygon manages risk through an active risk management process based on risk identification, risk assessment, risk management, monitoring and assess-ment. The process begins with each country in the Group identifying and assessing their most significant risks every year using a Group-wide risk template. Group management then identifies and assesses the most significant risks at Group level. The Group’s risk assessment is presented to the audit committee and Board of Directors annually.

Control activitiesControl activities counteract the risks identified during the risk assessment and ensure correct and reliable financial reporting and efficient processes. Control activities include both general and detailed controls intended to prevent, detect and correct errors and any fraud.

There is a basic control structure in place to counteract

and prevent the risks that the company has identified. The control structure is incorporated into the daily processes, and the Group’s finance and accounting system is structured to support the control activities. The company’s finance sys-tem is designed in such a way that payment of invoices, etc., must adhere to the established decision-making paths and to the signatory and authorisation rights that are stipulated in the internal control documents. In addition to the daily con-trol structure, there are a number of control activities to fur-ther detect and correct errors and deviations. Such control activities consist of monitoring at different levels in the organisation, such as the Board’s monitoring and reconcilia-tion of Board resolutions passed, a review and comparison of profit/loss and balance sheet items, reconciliation of accounts and approval and reporting of business transactions in the accounting department.

Information and communicationPolygon has built up an organisation to ensure that the finan-cial reporting is correct and that the process for preparing and presentation is efficient. The internal control documents clarify who is responsible for what in day-to-day interactions between the various departments and ensure that the rele-vant information and communications reach all affected parties. Group management is provided with both weekly and monthly financial information about the company and its subsidiaries regarding performance, future investments and liquidity planning. The company’s information policy ensures that all published information, both external and internal, is correct and issued at the appropriate time for each occasion.

Monitoring Monitoring is carried out continuously at all levels in the organisation. The Board regularly evaluates the information provided by management and the auditors. Furthermore, the Board carries out an annual follow-up of the completed risk assessment and the measures decided. Special attention is given to the Board’s monitoring for development of internal control and assurance that measures are taken regarding any deficiencies or proposals that have been put forward.

Annual internal control self-assessment In 2015, the Group introduced a procedure based on an inter-nal control self-assessment. Each subsidiary completes a self-assessment based on predefined questions formulated by the Group’s accounting department. The aim of this assess-ment is to examine the Group’s internal control system and its compliance with established policies and procedures. The results are reviewed and reported to the audit committee.

The self-assessment is carried out on the basis of signifi-cant transaction flows and controls in these flows. The focus is on material profit/loss and balance sheet items and the areas where the risk of errors could be significant. The self-assessment is carried out in the third quarter and follow-up controls are carried out at regular intervals by the Group’s accounting department.

Examples of monitoring activities• The Board’s review and approval policy• Reporting of risk analysis to the Board once a year• Reporting of annual internal control self-assessment

to the Board• Monthly/continuous monitoring and analysis of financial

reports

POLYGON 2018 59


BOARD OF DIRECTORS

GUNILLA ANDERSSONBoard memberBoard member since 2017 Nationality: SwedishBackground: Former CFO and Head of Shared Services at Optigroup. Formerly CFO TA Hydronics, CFO Tour & Andersson AB.

PETTER DARINBoard memberBoard member since 2015Nationality: Swedish. Background: Investment advisory professional, Triton Advisers. Formerly M&A and corporate finance advisor at UBS.

JONAS SAMUELSONBoard memberBoard member since 2010Nationality: Swedish Background: President and CEO of Electrolux. Formerly CFO of Munters.

NADIA MEIER-KIRNERChairman of the BoardBoard member since 2017Nationality: GermanBackground: Investment advisory professional, Triton Advisors. Formerly M&A and corporate finance advisor at Dresdner Kleinwort in Frankfurt.

LARS BLECKOBoard memberBoard member since 2018 (December)Nationality: Swedish Background: Former President and CEO of Loomis.

POLYGON 201860


MANAGEMENT

MATS NORBERGChief Financial OfficerBorn in 1959Joined Polygon in 2013Background: CFO for the Nordics, Balticsand Switzerland at Dahl International/Saint Gobain, CFO at AftonbladetEducation: M.Sc. Business Administration from Uppsala University.

AXEL GRÄNITZPresident and CEOBorn in 1968Joined Polygon in 2018Background: Member of the Executive Board of Dussmann Group, CEO of Dussmann International, senior positions at Arvato AG – Bertelsmann. Education: Politics at Vanderbilt.

JONAS GRANATH Chief Commercial Officer & Deputy CEOBorn in 1976Joined Polygon in 2014Background: Senior positions at IL Recycling Poland and the Swedish Trade CouncilEducation: M.Sc. in Economics and Business Administration from Stockholm School of Economics and University of St. Gallen.

CHRISTIAN KOHLChief Operating OfficerBorn in 1969Joined Polygon in 2006Background: Senior positions at 3M in sales and marketing. Country President at Munters/Polygon Austria and Switzerland Education: Law at University Vienna, Six Sigma Black Belt, IMP Programme at Duke University.

POLYGON 2018 61


CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

CONSOLIDATED FINANCIAL STATEMENTS

EUR thousand Note 2018 2017

Sales revenue 5 619,264 512,429 Cost of services sold 6, 8 –473,277 –385,750 Gross profit 145,987 126,679 Selling and administrative expenses 6, 7, 8 –112,293 –98,072 Other operating expenses 6 –8,364 –3,169 Operating profit 25,331 25,438 Financial income 9 91 151 Financial expenses 9 –14,686 –17,097 Profit/loss after net financial items 10,736 8,492Tax 10 –4,233 –3,024Profit/loss for the year 6,503 5,468

Profit/loss for the year Attributable to Parent Company shareholders 6,113 5,590Attributable to non-controlling interests 390 –122 Total 6,503 5,468Number of shares 5,600 5,600 Earnings per share before and after dilution 1.09 1,00


Profit for the year 6,503 5,468Other comprehensive income 24 Items that will not be reclassified to profit or loss Actuarial gains and losses –208 –222 Tax related to items in other comprehensive income 37 18 Items that may subsequently be reclassified to profit or loss Translation difference –1,081 511 Other comprehensive income –1,252 307 Comprehensive income for the year 5,251 5,775

Comprehensive income for the year Attributable to Parent Company shareholders 4,861 5,897 Attributable to non-controlling interests 390 –122 Total 5,251 5,775

POLYGON 201862


CONSOLIDATED BALANCE SHEET EUR thousand Note 2018 2017

ASSETS Non-current assets Goodwill 11, 13 137,126 110,942 Other intangible assets 12 53,329 41,960 Property, plant and equipment 14 46,101 40,200 Deferred tax assets 10 13,375 16,744 Other financial assets 941 2 Total non-current assets 250,872 209,848

Current assets Contract assets 15 44,730 28,246 Accounts receivable 17, 20 88,369 76,570 Receivables from the Parent Company 315 308 Current tax assets 10 1,821 213 Other current receivables 2,303 1,893 Prepaid expenses 16 5,476 5,602 Cash and bank balances 17, 19 33,192 42,541 Total current assets 176,206 155,373 TOTAL ASSETS 427,078 365,221

EQUITY AND LIABILITIES Equity 24 Share capital 58 58 Other contributed capital 10,771 10,771 Foreign currency translation reserve –1,795 –714 Retained earnings including profit for the year 54,761 48,819 Equity attributable to Parent Company shareholders 63,795 58,934 Non-controlling interests 11,696 820 Total equity 75,491 59,754

Non-current liabilities Pension provisions 25 5,129 4,856 Other provisions 1,485 1,519 Deferred tax liabilities 10 18,471 15,806 Non-current financial liabilities, interest-bearing 18, 28 214,785 183,389 Total non-current liabilities 239,870 205,570

Current liabilities Advance payments from customers 1,482 146 Contract liabilities 15 369 876 Pension provisions 25 59 132 Other provisions 3,062 4,932 Accounts payable 17 45,550 35,647 Interest-bearing current loans 17 – 885 Other liabilities 17, 23 20,308 16,958 Accrued expenses 17, 26 38,680 36,683 Current tax liabilities 10 2,207 3,638 Total current liabilities 111,717 99,897 TOTAL EQUITY AND LIABILITIES 427,078 365,221

Pledged assets and contingent liabilities are specified in Notes 20 and 27.

POLYGON 2018 63


CONSOLIDATED STATEMENT OF CASH FLOWS


Operating activitiesOperating profit 25,331 25,438 Non-cash items not included in operating profit 30 23,912 8,972 Income tax paid –6,313 –2,961 Net cash flow from operating activities before changes in working capital 42,930 31,449 Cash flow from changes in working capital:Change in accounts receivable and other current receivables –4,062 564 Change in contract assets and liabilities –11,601 9,855 Change in accounts payable and other current liabilities 3,924 –1,195 Accounts payable 31,191 40,673

Cash flow from investing activities Acquisitions 3 –34,038 –7,108 Investments in property, plant and equipment 14 –16,288 –16,925 Investments in intangible assets 12 –2,239 –2,390 Sale of non-current assets 694 86 Cash flow from investing activities –51,871 –26,337 Cash flow before financing activities –20,680 14,336

Cash flow from financing activities Borrowings 210,000 – Repayment of loans payable –181,410 –14 Dividend received 8 4 Dividend to non-controlling interests – –163 Financial income received 83 147 Financial expenses paid1) –17,149 –9,293 Cash flow from financing activities 11,532 –9,319

Cash flow for the year –9,148 5,017 Cash and bank balances at the beginning of the year 42,541 36,585 Exchange difference in cash and bank balances –201 939 Cash and bank balances at the end of the year 33,192 42,541

1) Whereof interest paid EUR Million 9.1 (9.3).

POLYGON 201864


Attributable to Parent Company shareholders

EUR thousand Share

capital

Other contributed

capital

Foreign currency

translation reserve

Actuarial gains/ losses on defined-

benefit pension obligations1)

Retained earnings

including profit for the year1) Total

Non- controlling

interestsTotal

equity

Closing balance, 31 December 2016 58 10,771 –1,225 –1,603 45,036 53,037 1,105 54,142 Dividend to shareholders – – – – – – –163 –163 Profit/loss for the year – – – – 5,590 5,590 –122 5,468 Actuarial gains/losses – – – –222 – –222 – –222 Other comprehensive income – – 511 – – 511 – 511 Tax attributable to items in other comprehensive income – – – 18 – 18 – 18 Opening balance, 31 December 2017 58 10,771 –714 –1,807 50,626 58,934 820 59,754 New share issue – – – – – – 10,486 10,486 Profit for the year – – – – 6,113 6,113 390 6,503 Actuarial gains/losses – – – –208 – –208 – –208 Other comprehensive income – – –1,081 – – –1,081 – –1,081 Tax attributable to items in other comprehensive income – – – 37 – 37 – 37 Opening balance, 31 December 2018 58 10,771 –1,795 –1,978 56,739 63,795 11,696 75,491

1) In equity in the balance sheet, actuarial gains/losses on defined-benefit pension obligations are included in the item retained earnings, which are recognised in two separate columns above.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

POLYGON 2018 65


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 CORPORATE INFORMATIONThese consolidated financial statements include the Parent Company Polygon AB, corporate identity number 556816-5855, and its subsidiaries. The postal address of the head office is Sveavägen 9, SE-111 57 Stockholm, Sweden.

Polygon AB is a wholly owned subsidiary of Polygon Holding AB, corporate identity number 556809-3511, domiciled in Stockholm, Sweden. Polygon Holding AB is the highest level at which consolidated financial statements are prepared. The ultimate Parent Company of the Group is MuHa LuxCo S.à.r.l., corporate identity number B154023 and domiciled in Luxembourg, which is exempt from the requirement to prepare consoli-dated financial statements. MuHa LuxCo S.á.r.l is under the controlling influ-ence of Triton Fund III, which, under the regulations applying in Luxembourg, is not required to prepare consolidated financial statements.

The financial statements pertain to Polygon AB and were approved by the Board of Directors in connection with the Board meeting on 2 April 2019.

NOTE 2 ACCOUNTING POLICIES FOR THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2.1 SIGNIFICANT ACCOUNTING POLICIES

RULES AND REGULATIONS APPLIEDThe consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB), and the interpre-tations issued by the International Financial Reporting Interpretations Committee (IFRIC) as adopted by the EU for financial years beginning on or after 1 January 2018. In addition, the Swedish Annual Accounts Act and the Swedish Financial Reporting Board’s recommendation RFR 1 Supple-mentary Accounting Rules for Groups has been applied.

The Parent Company applies the same accounting policies as the Group, with the exception of those cases specified in Note 1 to the Parent Company financial statements.

PRESENTATION CURRENCYThe presentation currency of the Group is the euro (EUR), which is the functional currency of the Parent Company. Unless otherwise specified, all amounts are stated in thousands of euros (EUR thousand).

The financial statements are presented in euro (EUR), rounded off to the nearest thousand, unless otherwise specified. All individual figures (including totals and sub-totals) are rounded off to the nearest thousand. From a presentation standpoint, certain individual figures may therefore differ from the computed totals.

REPORTING PERIODThe reporting period is the financial year from 1 January 2018 to 31 December 2018, and all balance sheet items refer to 31 December 2018. The previous financial year was 1 January 2017 to 31 December 2017 and the balance sheet items for this period refer to 31 December 2017.

BASIS OF PRESENTATIONThe consolidated financial statements have been prepared based on the assumption of a going concern. Assets and liabilities are measured at historical cost with the exception of derivative financial instruments and additional purchase prices, which are measured at fair value.

BASIS OF CONSOLIDATIONThe consolidated financial statements include the Parent Company and its subsidiaries. The financial statements of the Parent Company and the subsidiaries that are a part of the consolidated financial statements refer to the same period and are prepared in accordance with the same accounting policies.

All inter-company items are eliminated in full and are consequently not included in the consolidated financial statements.

Definition of subsidiaryThe term “subsidiary” includes all companies over which Polygon AB (publ) holds a controlling influence. Controlling influence means that Polygon has the ability to govern the subsidiary, is entitled to the return that it generates and can use its influence to control the activities that impact this return. The consolidated financial statements are prepared according to the acquisition method.

POLYGON 201866

NOTES

Non-controlling interestsA non-controlling interest is the portion of the profit/loss and net assets of non-wholly owned subsidiaries that accrues to owners other than Parent Company shareholders. Its share of profit/loss is included in the net profit of the Group and its share of net assets is included in consoli-dated equity.

Translation of financial statements of foreign subsidiariesSubsidiaries with a functional currency other than EUR are translated to EUR, since this is the presentation currency of the Group and the func-tional currency of Polygon AB. Income statement items are translated at the average exchange rate and balance sheet items are translated at the closing day rate. All surplus values recognised in connection with the acquisition of a foreign subsidiary, such as goodwill and other previously unrecognised intangible assets, are regarded as belonging to the respec-tive unit and are therefore translated at the closing day rate. Translation differences are recognised in other comprehensive income. On the divestment of a subsidiary, the accumulated translation differences are reversed to profit or loss.

The exchange rates applied for foreign currency translation are as follows:

Closing day rate

31 Dec 2018

Average rate

2018

Closing day rate

31 Dec 2017

Average rate

2017

CAD 0.6416 0.6542 0.6664 0.6830

DKK 0.1339 0.1342 0.1343 0.1344

GBP 1.1044 1.1303 1.1274 1.1409

NOK 0.0997 0.1042 0.1016 0.1072

SEK 0.0973 0.0975 0.1015 0.1038

SGD 0.6385 0.6279 0.6250 0.6416

USD 0.8731 0.8475 0.8358 0.8864

GROSS RECOGNITIONGross recognition is applied consistently in the recognition of assets and liabilities, with the exception of cases when there is both a receivable and a liability against the same counterparty and Polygon has a legally enforceable right to offset these and intends to do so. Unless otherwise stated, gross recognition is also applied for revenue and expenses.

CLASSIFICATION OF ASSETS AND LIABILITIESNon-current assets, non-current liabilities and provisions are expected to be recovered or settled more than 12 months after the balance sheet date. Current assets and current liabilities are expected to be recovered or settled within 12 months after the balance sheet date.

NOTE 2.2 CHANGES IN ACCOUNTING POLICIES

IFRS ADOPTED BY THE EU THAT CAME INTO EFFECT IN 2018: A number of new or revised IFRS came into effect as of 1 January 2018. The IFRS that impact the consolidated financial statements are presented below.

IFRS 15 Revenue from Contracts with Customers This standard combines, enhances and replaces specific guidance on revenue recognition with a single standard.

DESCRIPTION OF POLYGON’S OPERATIONSPolygon provides services in the area of preventing, controlling and mitigating the effects of water, fire and climate.

The customer base includes insurance companies, companies in the private and public sectors, and households. The scope and complexity of the projects vary from simple leak detec-tion to large restoration projects, with most of the projects being small (under EUR 2 thousand) and short-term (with a duration of under three months). Typical examples of services that Polygon provides are repair and restoration of equipment, restoration services for everything from documents to buildings, leak detection and moisture control as well as keeping certain climate conditions at a constant level.

Polygon’s operations are characterised by a local presence and strong ties to local customers. International cooperation has become increas-ingly significant in the major complex claims segment.

Payment terms are determined according to industry practices and vary from country to country and project to project (from advance and partial payments to payments due after performance obligations are satisfied). Polygon’s payment terms do not include financial components; nor are they subject to any type of variable or restricting conditions.

Warranties are provided according to business practices and legal requirements in the country where the project is performed.

PERFORMANCE OBLIGATIONS AND REVENUE RECOGNITIONMost of Polygon’s performance obligations are satisfied over time since Polygon performs restoration and humidity control services on assets controlled by the customer. Revenue from such projects is recognised over the period during which the performance obligation is carried out. For consulting services, equipment rental and other services billable by the hour or other fixed time periods, the practical expedient is used and revenue is recognised at the amount at which Polygon has a right to invoice during the current accounting period.

The exception from the above is leak detection projects where the performance obligation is satisfied upon receipt of a leak detection report. Revenue for these jobs is recognised at a specific point in time.

Commission fees from the franchise part of the business are rec-ognised at the amount to which Polygon has the right to invoice the franchisee during the current accounting period.

The allocation of performance obligations is straightforward due to the nature of Polygon’s business – one job is considered one per-formance obligation, which makes it easy to allocate the price to the performance obligation, regardless of whether it is a fixed price or current account.

KEY ASSESSMENTS AND THE PORTFOLIO APPROACHPolygon uses the portfolio approach for revenue recognition, which allows bundling of similar agreements and performance obligations for more effective handling. The portfolio approach is applied to the large amount of small (under EUR 2 thousand) and short-term (under three months) obligations that make up the bulk of the Group’s business. The remaining obligations with a longer duration are recognised using the percentage of completion method.

Polygon uses costs incurred to determine the percentage of comple-tion of the performance obligation (based on costs incurred to date). In projects where percentage of invoicing reflects the progress of deliver-ence in a more accurate way this method is use. These methods together provides a fair presentation of the transfer of goods and services and shows the Group’s completion of the promised deliveries to the cus-tomer. The percentage of invoicing (for example, when an agreement with the customer concerning invoicing reflects the progress in terms of delivering the performance obligation) in projects where this provides a more accurate reflection of the outcome of the performance obligation. Such a combination provides a fair presentation of the transfer of goods and services and shows the Group’s completion of the promised deliver-ies to the customer.

POLYGON 2018 67

NOTES

CONSEQUENCES OF IMPLEMENTING THE NEW STANDARDThe Group has chosen to apply the standard retrospectively, utilising the practical expedient to not restate contracts that begin and end within the same annual financial year or are completed at the beginning of the current financial year.

When introducing the new standard, the reallocation of revenue recognition had a positive one-time effect on equity of EUR 0.8 million in 2016. Application of the new standard will not have a significant impact on revenue on an annual basis. Restatement confirms the earlier assumption that the allocation of revenue between months has changed and now reflects the activity level of the business operations during the reporting month. When recognised in accordance with the new IFRS 15, revenue for 2017 was EUR 6.4 million lower than with the application of previous standards.

Previously recognised

amount2017

Restated amount

2017 Change

Consolidated income statementSales revenue 518,814 512,429 –6,385

Cost of services sold –391,649 –385,750 5,899

Net profit/loss 127,165 126,679 –486 EBITA 25,924 25,438 –486

Profit/loss before tax 9,100 8,614 –486

Tax –3,165 –3,024 141

Profit/loss for the year 5,935 5,590 –345

IFRS 9 Financial InstrumentsThis standard came into effect on 1 January 2018 and replaced IAS 39 Financial Instruments: Recognition and Measurement. The new standard contains rules for classification and measurement of financial assets and liabilities, impairment of financial instruments and hedge accounting.

The new standard introduces a method of classification and measure-ment of financial assets dependent on the company’s business model for holding the asset and the contractual cash flows of the asset:• Financial assets held for the sole purpose of receiving the contractual

cash flows of the asset and where the cash flows consist solely of nominal amounts and interest on nominal amounts are to be measured at amortised cost.

• Financial assets held for the purpose of receiving contractual cash flows as well as being available for sale and where the cash flows consist solely of nominal amounts and interest on nominal amounts are to be measured at fair value with changes in value recognised in other comprehensive income.

• Financial assets held for the sole purpose of being available for sale are measured at fair value with changes in value recognised in profit or loss.

• Financial assets with contractual cash flows consisting not only of nominal amounts and interest on nominal amounts are to be measured at fair value with changes in value recognised in profit or loss, regard-less of the purpose for which the asset is held.

For financial liabilities, the rules in IFRS 9 are in principle the same as in IAS 39, with the exception that changes in the value of financial liabilities that are measured according to the fair value option and that are attri-butable to changes in the credit risk associated with the liability are to be recognised in other comprehensive income.

The new impairment rules entail a transition from an “incurred loss model” to an “expected loss model”. The purpose of this change is to make a loss allowance for credit losses at an earlier stage and to reduce volatility in recognised credit losses.

The new model, which encompasses all financial assets measured at amortised cost, is based on a division of assets into three categories depending on the change in credit risk. However, the division into cate-gories presupposes that there are assets of a more long-term character which is not the case for Polygon, whose financial assets primarily consist of accounts receivable and cash and cash equivalents. Since all of Poly-gon’s financial assets subject to a loss risk are more current in nature, the simplified method is used for impairment testing, which is described in greater detail in Note 2.3 Summary of key accounting policies and the section “Impairment of financial assets”.

Accounts receivable mainly pertain to large and well-established customers (insurance companies) with good ability to pay, which is taken into consideration in the loss allowance for expected credit losses. Credit terms are normally short-term, in the range of ten to 60 days with a standard of 30 days. The credit losses incurred by the Group over the past three years have been minor. The loss allowance for expected credit losses as of 31 December 2018 is presented in Note 20 Accounts receivable.

Financial liabilities mainly comprise accounts payable, and are not affected by the new rules in IFRS 9, with one exception described above (“fair value option”). This rule is not applicable for Polygon.

One of the main objectives of the new rules for hedge accounting is to reflect the effects of a company’s risk management activities on the financial reporting.

Polygon does not apply hedge accounting and is therefore not impacted by the changes above.

The main focus for the Group has been the impairment model for expected credit losses since accounts receivables are a material part of the balance sheet. The previous model for the provision for doubtful receivables in the Group has been evaluated with the new standard in mind and the outcome is that the new standard will have a minor, imma-terial impact on the loss allowance for credit losses, and that the previous method meets the requirements according to the new standard.

The review carried out prior to the implementation of the new standard confirmed that the new standard would not have a material impact on the financial statements. Polygon has therefore not carried out any remea-surement that impacted the opening equity for 2018.

IFRS ADOPTED BY THE EU THAT WILL COME INTO EFFECT IN 2019: IFRS 16 LeasesThis standard will come into effect on 1 January 2019 and replaces IAS 17 Leases and IFRIC 4 Determining Whether an Arrangement Contains a Lease. For companies that are a lessee, the current classification into operating and finance leases will disappear and be replaced by a model where assets and liabilities for all leases are to be recognised in the balance sheet. For leases with a term of 12 months or less or where the underlying asset is of a low value (corresponding to approximately USD 5,000 or less), there is a possibility to apply an exemption rule. In the income state-ment, depreciation is to be recognised separately from interest expenses attributable to the lease liability.

This means that when the company enters into a lease, all future payments for this lease are discounted and recognised as a financial liability in the balance sheet. A corresponding amount is recognised as a non-current asset (right-of-use asset). When the lease payments are then settled through an invoice or in a similar manner, they are recognised as a repayment of the liability and interest expense. The non-current assets are depreciated in accordance with the economic life of the asset.

In the financial statements, this will entail a slight improvement in oper-ating profit as well as an increase in financial expenses. In the statement of cash flows, payment will be shifted from operating activities to financing activities. The balance sheet total and performance measures linked to the balance sheet total will also be impacted by the change in accounting policy.

During 2018, Polygon continued preparing for the transition to the new standard. Leases have been identified and evaluated, system support for managing the leases has been implemented and the organisation has undergone training in the new standard and the new system support. Upon the transition on 1 January 2019, the Group will apply the modified retrospective approach, which entails that the opening balance will be adjusted for the accumulated effect of initial application of the standard on the first application day and comparative years will not be restated.

The lease liability is measured at the present value of the remaining lease payments and the right-of-use asset for all leases amounts to the equivalent of the lease liability adjusted for any prepaid and accrued lease payments recognised as of 31 December 2018. Only marginal reclassifi-cations of prepaid and accrued lease payments have been carried out. An incremental borrowing rate has been established for each country. The transition will have no impact on opening equity.

Polygon has chosen to apply the exemption rules for short-term leases and leases for which the underlying asset is of a low value. These leases are not included in the right-of-use asset or liability. In applying the standard, Polygon has determined that a time horizon other than five years can generally be used for leases for offices and depots with open final dates, although the formal lease term is shorter. Right-of-use assets primarily comprise leases for offices, depots and cars.

When the standard has come into effect, the following preliminary adjustments in Polygon’s balance sheet will be recognised as of 1 January 2019. • Right of use assets EUR 66 million• Long-term financial lease liabilities EUR 46 million• Short-term financial leasing liabilities EUR 20 million

The preliminary distribution of the right of use assets per segment is as follows:• Continental Europe EUR 34 million• Norden & UK EUR 27 million• North America EUR 5 million

Note 2.2, cont.

POLYGON 201868

NOTES

The preliminary calculation gives an increase in the Group’s total balance sheet total by 15.5%.

Polygon expects IFRS 16 to have a positive impact on EBITA and a negative impact of approximately EUR 1 million on financial items, which will have a slightly negative impact of approximately EUR 1 million on the total net profit for the Group.

NOTE 2.3 SUMMARY OF KEY ACCOUNTING POLICIES

RECOGNITION OF FOREIGN EXCHANGE EFFECTSTransactions denominated in a currency other than the Group’s functional currency are restated at the rate prevailing on the transaction date. Assets and liabilities denominated in a currency other than the Group’s functional currency are restated at the closing day rate. Exchange differences are recognised in profit or loss as they arise.

RECEIVABLES AND LIABILITIES IN FOREIGN CURRENCYReceivables and liabilities denominated in foreign currency have been restated at the closing day rate. Exchange gains and losses pertaining to operating receivables and liabilities are recognised in operating profit. Exchange differences related to financial assets and liabilities are recognised in financial expenses in net financial items. As of 1 January 2018, exchange differences related to inter-company financial assets and liabilities are recognised in other comprehensive income.

INTANGIBLE ASSETSAn intangible asset is an identifiable non-monetary asset that lacks physical substance. Intangible assets that are identified and measured separately from goodwill from business combinations may include trademark-related, customer-related, contract-related and/or technol-ogy-related assets. Typical marketing and customer-related assets are trademarks and customer relationships. Customer contracts and cus-tomer relationships are attributable to expected customer loyalty and the cash flow that is expected to arise over the remaining useful lives of these assets. The cost for this type of intangible asset consists of the fair value on the acquisition date, calculated according to established valuation methods.

Development costs are recognised as an intangible asset only if it is sufficiently probable that the development project will generate eco-nomic benefits in the future and the cost of the asset can be measured reliably. The cost of capitalised development costs includes only expenses directly attributable to the development project. Other internally gener-ated intangible assets are not recognised as assets. Instead, the costs are recognised as an expense in the period in which they arise.

Separately acquired intangible assets are recognised at cost less accumulated amortisation and impairment.

All intangible assets are amortised on a straight-line basis over their estimated useful lives and are reviewed on every balance sheet date. Amortisation begins when the asset is available for use. Certain trade-marks have an unlimited lifetime and are not amortised at all.

Amortisation is calculated as follows: Years

Patents, licenses and software 3–8

Customer relationships 10–12

Where appropriate, order backlog is amortised over a period of one to three months.

BUSINESS COMBINATIONS AND GOODWILLBusiness combinations are recognised according to the acquisition method. When a business combination occurs, the company’s assets (including previously unrecognised intangible assets) and liabilities (including contingent liabilities and excluding future restructuring costs) are identified and measured at fair value.

If the consideration paid by the Group is greater than the fair value of the identified net assets, the difference is recognised as consolidated goodwill. Goodwill is continuously measured at cost less accumulated impairment. Since it is not possible to individually test goodwill for impairment, goodwill is allocated to one or more cash-generating units, depending on how the goodwill is monitored for internal control purposes. Polygon has allocated goodwill to three cash-generating units: Nordics & UK, Continental Europe and North America.

Goodwill is not amortised, but is instead tested for impairment annually.See Note 11 Goodwill and Note 13 Impairment testing of goodwill and

trademarks.

PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment are physical assets that are used in the Group’s operations and have an expected useful life exceeding one year. Property, plant and equipment are initially measured at cost and are depreciated on a straight-line basis over their estimated useful lives. When property, plant and equipment are recognised, any residual value is taken into account when the depreciable amount of the asset is determined. Depreciation begins when the asset is ready to be taken into use. Land is not depreciated.Property, plant and equipment are derecognised from the balance sheet on divestment or when no future economic benefits are expected from either their use or their sale. Any gains or losses are calculated as the difference between the sale proceeds and the asset’s carrying amount. The gain or loss is recognised in profit or loss as other expenses or other income in the accounting period when the asset was divested.

The residual value, useful life and depreciation rate of an asset are reviewed at the end of each financial year and adjusted, if necessary, for subsequent periods.

Customary costs for maintenance and repairs are expensed as incurred. However, costs related to significant renewals and improvements are recognised in the balance sheet and depreciated over the remaining useful life of the underlying asset.

Depreciation is calculated as follows: Years

Improvements in rented premises 6–9

Dehumidifiers and similar equipment 5–10

Buildings 20–25

Equipment 3–6

IMPAIRMENT OF INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENTIf the Polygon Group sees internal or external indications that the value of an asset has declined, the asset is to be tested for impairment. For goodwill and assets with indefinite useful lives, such impairment testing is to be carried out at least annually, regardless of whether there is evidence of impairment or not. If an asset cannot be tested separately, it is assigned to a cash-generating unit to which identifiable cash flows can be allocated.

An impairment loss is to be recognised for an asset or a group of assets (cash-generating units) if the carrying amount is higher than the recover-able amount. The recoverable amount is the higher of value in use and net realisable value. Impairment losses are recognised in profit or loss.

For all assets except goodwill and intangible assets with indefinite useful lives, an assessment is made on each balance sheet date as to whether there is an indication that an earlier impairment loss, in whole or in part, is no longer justified. If the assumptions underlying the calculation of an asset’s recoverable amount have changed, the carrying amount of the asset or assets is increased to its recoverable amount. Such a reversal is to not to exceed the amount the company would have recognised after depreciation and amortisation if the impairment had not been recognised. The reversal is recognised in profit or loss unless the asset is recognised in a restated amount in accordance with another standard.

Goodwill is allocated to different cash-generating units. If the alloca-tion of goodwill cannot be completed before the end of the year during which the acquisition was carried out, the initial allocation should then be carried out before the end of the financial year following the year when the acquisition was carried out. In such cases, amounts relating to non-al-located goodwill and the reason why they have not been allocated should be stated. Impairment of goodwill and intangible assets with indefinite useful lives is not reversed.

FINANCIAL INSTRUMENTSA financial instrument is any type of contract that gives rise to a financial asset in one company and a financial liability or equity instrument in another company. Financial instruments recognised as assets in the balance sheet include cash and cash equivalents, accounts receivable, other receivables and currency derivatives. Financial instruments recognised as liabilities include trade payables, loans payable and other liabilities. Recognition depends on how the financial instruments have been classified. At year-end, the company had SEK/EUR hedges to cover the head office’s costs.

Recognition and measurement A financial asset or financial liability is recognised in the balance sheet when the company becomes a party in accordance with the contractual terms of the instrument. Accounts receivable are recognised in the balance sheet when an invoice has been sent and the company’s right to remuneration is unconditional. A liability is recognised when the counter-party have performed and a contractual obligation to pay exists, even if an

POLYGON 2018 69

NOTES

invoice has not yet been received. Trade payables are recognised when an invoice has been received.

A financial asset and financial liability are offset and recognised in a net amount in the balance sheet only when there is a legal right to offset the amounts and the company intends to settle the items in a net amount or to simultaneously realise the asset and settle the liability. A financial asset is derecognised from the balance sheet when the contractual rights have been realised, mature or the company loses control over them. The same applies for a portion of a financial asset. A financial liability is derecognised from the balance sheet when the contractual obligation has been fulfilled or otherwise extinguished. The same applies for a portion of a financial liability. On each reporting date, the company assesses whether there are objective indications that a financial asset or group of financial assets requires impairment.

Gains and losses on derecognition from the balance sheet and modifi-cation are recognised in profit or loss.

CLASSIFICATION AND MEASUREMENTFinancial assetsDebt instruments: The classification of financial assets that are debt instruments is based on the Group’s business model for managing the asset and the nature of the contractual cash flows.

Instruments are classified as follows:• amortised cost• fair value through other comprehensive income, or• fair value through profit or loss.

The Group’s debt instruments are classified at amortised cost.Financial assets classified at amortised cost are initially measured at fair

value plus transaction costs. Accounts receivable and lease receivables are initially recognised at their invoiced amount. After initial recognition, the assets are measured according to the effective interest method. In accordance with the business model, assets classified at amortised cost are held for the purpose of collecting the contractual cash flows, which exclusively comprise payments of the principal and interest on the out-standing principal. The assets are covered by a loss allowance for expected credit losses.

Derivatives: Classified at fair value through profit or loss. The Group does not apply hedge accounting.

Fair value is determined according to the description in Note 18 Interest- bearing loans and borrowings.

Financial liabilitiesFinancial liabilities are classified at amortised cost with the exception of derivatives. Financial liabilities recognised at amortised cost are initially measured at fair value including transaction costs. After initial recognition, they are measured at amortised cost according to the effective interest method.

Comparative year in accordance with IAS 39In the 2017 comparative year, financial instruments were recognised in accordance with IAS 39. IAS 39 used different classification categories than IFRS 9. Nevertheless, the classification categories in accordance with IAS 39 resulted in a corresponding recognition at amortised cost, fair value through profit or loss or fair value through other comprehensive income.

Moreover, IAS 39 established a different method for recognising pro-visions for credit losses, whereby the provision was based on an incurred loss model, unlike the method established in IFRS 9, whereby the provision is based on an expected loss model. As far as the Group is concerned, there are no other differences between the standards. The transition from IAS 39 to IFRS 9 has had no material impact on the Group; see Note 20 Accounts receivable.

CASH AND BANK BALANCESCash and current bank balances in the balance sheet consist of bank deposits, available cash and demand deposits with a maturity of three months or less from the date of acquisition. Cash and bank balances are subject to the requirements for a loss allowance for expected credit losses.

FINANCIAL LIABILITIESThe Group’s financial liabilities are divided into two categories:• Financial liabilities measured at fair value through profit or loss

– Held-for-trading financial liabilities– Financial liabilities initially measured at fair value (“fair value option”)

• Financial liabilities measured at amortised cost

Financial liabilities measured at fair value through profit or loss Some of the Group’s acquisitions include additional purchase prices. These are recognised as a financial liability measured at fair value through profit or loss. Additional purchase prices have been classified at level 3 since there is no observable market data to apply.

Changes in the value of financial liabilities that are measured at fair value (“fair value option”) and are attributable to changes in the credit risk associated with the liability are to be recognised in other comprehensive income.

Financial liabilities measured at amortised costLiabilities are initially recognised at fair value less transaction costs. In subsequent periods, these liabilities are recognised at amortised cost in accordance with the effective interest method.

Fees paid for loan commitments and borrowings (commitment fees) are recognised as transaction costs and are allocated over the term of the loan commitments/loans in profit or loss.

In cases where quoted information/inputs are not available in order to measure financial instruments at fair value, established valuation methods that can be more or less dependent on quoted information/inputs are used. In some cases, valuation methods based on the company’s own assumptions and estimates are applied. The fair values of financial assets and liabilities are assumed to be their nominal values for those assets and liabilities with a term of less than one year. The fair values of financial liabilities are their discounted cash flows. Discounting is carried out at the interest rate that is available to the Group for similar financial instruments.

Purchases and sales of financial instruments are recognised on the trade date, which is the date on which the Group commits to purchase or sell the financial instrument. Financial instruments are derecognised when the right to receive or pay cash flows attributable to the financial instrument expires or has been transferred, or the Group has explicitly transferred all risks, allocations and obligations entailed by the holding of the financial asset or liability.

FINANCIAL DERIVATIVES AND HEDGE ACCOUNTINGDerivative financial instruments are measured initially and subsequently at fair value. Changes in fair value are recognised through profit or loss unless they comprise part of an effective hedging relationship and hedge accounting is applied. Once a derivative contract has been entered into, the Group chooses to classify the derivative as a fair value hedge, a cash flow hedge or a hedge of a net investment in foreign operations. If a fair value hedge exists and the criteria in IAS 39 have been met, the changes in value are recognised in profit or loss together with changes in the value of the hedged item in the balance sheet. Changes in the value of derivatives that comprise part of an effective hedging relationship are recognised as other comprehensive income. The accumulated change in value for this type of derivative is reversed to profit or loss in the same period in which the hedged item affects profit or loss.

When a hedging instrument is sold, terminated, exercised, revoked or otherwise ceases to meet the criteria for hedge accounting, any gains or losses that have been recognised in other comprehensive income, and ultimately recognised as an adjustment of either expenses or revenue when the planned transaction or assumed obligation is realised, are rec-ognised in profit or loss. However, if a planned transaction or an assumed obligation is no longer expected to occur, the accumulated gain or loss that has been recognised in other comprehensive income for the period in which the hedge applied is immediately transferred to profit or loss.

Polygon does not apply hedge accounting.

IMPAIRMENT OF FINANCIAL ASSETSWith the exception of financial assets classified at fair value through profit or loss, the Group’s financial assets are subject to impairment for expected credit losses. In addition, impairment also encompasses con-tract assets not measured at fair value through profit or loss. The simplified impairment method can be applied for all of Polygon’s financial assets. In accordance with IFRS 9, impairment losses are recognised prospectively and a loss allowance is recognised when there is exposure to credit risk, usually on initial recognition. Expected credit losses reflect the present value of all deficits in cash flows attributable to expected losses, either for the next 12 months or for the expected remaining term of the financial instruments, depending on the type of asset and on potential credit dete-rioration since initial recognition. Expected credit losses reflect an objec-tive, probability-weighted outcome taking into consideration multiple sce-narios based on reasonable and well-founded forecasts. The calculation of the impairment requirement for doubtful receivables, which are the most material financial assets subject to a loss risk, comprises a combination of a collective and an individual assessment. In the collective assessment, a provision is made for the loss risk for all accounts receivable that are more than 180 days past due. For other accounts receivable, an individual assessment of the loss risk is carried out based on the customer’s ability to

Note 2.3, cont.

POLYGON 201870

NOTES

pay and other relevant factors for individual customers or for the specific market in which the customer operates.

On each balance sheet date, the Polygon Group assesses whether there are any objective circumstances that indicate that a financial asset may need to be impaired. Financial assets are recognised in the balance sheet at amortised cost, meaning the net of their gross value and the loss allowance. Changes in the loss allowance are recognised in profit or loss.

PROVISIONSA provision is recognised when the Group has a present obligation, either legal or informal, as a result of a past event, it is probable that a payment will be required to settle the obligation and the amount of the obligation can be reliably measured. When the company expects some or all of the expenditure required to settle an obligation to be reimbursed by another party, for example within the framework of an insurance agreement, the expected reimbursement is recognised as a separate asset, but only when it is virtually certain that reimbursement will be received.

If the time value is material, the present value of the future payment is calculated using a discount rate that reflects the current market assess-ments of the time value of money and the risks specific to the liability. The increase in the obligation due to the time value is recognised as an interest expense.

EMPLOYEE BENEFITSThe Group has both defined-benefit and defined-contribution pension plans as well as other long-term employee benefits.

Provisions for defined-benefit plans are calculated using the projected unit credit method. In addition to taking the pensions and statutory rights that are known on the balance sheet date into consideration, assumptions are made regarding expected pension and salary increases and other significant factors. The calculation is based on actuarial computation methods.

Items attributable to the vesting of defined-benefit pensions during the current period and net interest on the defined-benefit net liability (asset) are recognised in profit or loss. Costs for service in earlier periods that are attributable to a change in the pension plan or a reduction are also rec-ognised in profit or loss, as are any gains or losses that arise on settlement of the pension liability. Remeasurements, which are recognised in other comprehensive income under the heading “Items that will not be reclas-sified to profit or loss”, comprise actuarial gains and losses, the difference between actual return and interest income on plan assets and the effect of changes in asset caps excluding net interest. Actuarial gains and losses arise due to changes in actuarial assumptions and differences between previous actuarial assumptions and the actual outcome.

A net liability or net asset comprising the net of the present value of the defined-benefit pension obligations and the fair value of the plan assets is recognised in the balance sheet for each pension plan. The carrying amount of the net asset is limited to the asset cap, which comprises the present value of repayments from the plan or reduced future payments to the plan.

The total net obligation for all plans is recognised in the consolidated balance sheet after adjustment for any prior costs that have not yet been allocated to a particular period of time. The net obligation is divided into a current and a non-current portion.

The Group’s costs for defined-contribution pension plans are charged to profit or loss in the year to which they are attributable.

TERMINATION BENEFITSA provision is recognised in conjunction with the termination of employ-ment only if the company is obligated to either terminate the employment of an employee or group of employees before the normal point in time or to pay remuneration upon termination through an offer of voluntary resignation. In the latter case, a liability and expense are recognised if it is probable that the offer will be accepted and the number of employees who will accept the offer can be reliably estimated.

LEASESLeases are classified in the consolidated financial statements as either finance or operating leases. A finance lease exists when the financial risks and rewards of ownership are essentially transferred to the lessee.

Assets that are leased under finance leases are recognised as non-current assets in the balance sheet and are initially measured at the lower of the fair value of the lease object and the present value of the minimum lease payments when the lease is entered into. The obligation to pay future lease payments is recognised as non-current and current liabilities. The leased assets are depreciated over the useful life of the asset in question, while the lease payments are recognised as interest and repayment of the liability.

Leases where the lessor retains essentially all of the risks and rewards of ownership are classified as operating leases. Operating lease payments

that the Polygon Group pays in its capacity as lessee are expensed on a straight-line basis over the lease term.

SEGMENT REPORTINGThe Group has three operating segments. The operating segments are identified based on the internal monitoring of the Group’s operating activ-ities. Operating profit for the identified operating segments is regularly monitored by the Group’s chief operating decision-making, which is Polygon’s President and CEO, in order to allocate resources and assess results. The Group’s internal reporting and, consequently, the information provided to the chief operating decision-maker, are divided into geo-graphic areas – Nordics & UK, Continental Europe and North America – which constitute the Group’s operating segments.

The segments are responsible for operating profit and the net assets that are used in their operations, while net financial items, tax, net borrow-ings and equity are not recognised by segment. Operating profit and net assets for the segments are consolidated according the same principles as for the Group as a whole. The segments consist of a group of separate companies divided geographically by country. Operating expenses that are not included in the segments are recognised in Group-wide expenses and consist of Group-wide functions, including Group management and central staffs.

REVENUEPolygon’s revenue is generated from the sale of services in the area of preventing, controlling and mitigating the effects of water, fire and climate.

Most of Polygon’s revenue is generated from performance obligations that are satisfied over time since Polygon performs restoration and humidity control services on assets controlled by the customer. Reve-nue from such projects is recognised over the period during which the performance obligation is carried out. For consulting services, equipment rental and other services billable by the hour or other fixed time periods, the practical expedient is used and revenue is recognised at the amount at which Polygon has a right to invoice during the current accounting period.

The exception from the above is leak detection projects where the per-formance obligation is satisfied upon receipt of a leak detection report. Revenue for these jobs is recognised at a specific point in time.

2018 Nordic &

UKContinental

EuropeNorth

AmericaGroup

Total

Point in time for revenue recognitionRevenue recognised at one point in time 18,502 22,707 25 41,234

Revenue recognised over time 165,461 349,579 4,988 520,028

Revenue recognised according to practical exemption at invoicing 18,727 9,564 29,711 58,002

Total revenue recognised 202,690 381,850 34,724 619,264

2017

Point in time for revenue recognitionRevenue recognised at one point in time 9,300 15,724 6 25,030

Revenue recognised over time 117,751 311,173 6,705 435,629

Revenue recognised according to practical exemption at invoicing 16,992 8,874 25,904 51,770

Total revenue recognised 144,043 335,771 32,615 512,429

Polygon uses the portfolio approach for revenue recognition, which allows bundling of similar agreements and performance obligations for more effective handling. The portfolio approach is applied to the large amount of small (under EUR 2 thousand) and short-term (under three months) obligations that make up the bulk of the Group’s business. The remaining obligations with a longer duration are recognised using the %age of completion method.

In loss-making projects where it is not likely that the customer will com-pensate Polygon for services rendered, the loss is recognised immediately.

In addition to exchange gains on accounts receivable and accounts payables, other operating income includes capital gains on property, plant and equipment sold. Financial income is allocated using the effective interest method.

Commission fees from the franchise part of the business are rec-ognised at the amount to which Polygon has the right to invoice the franchisee during the current accounting period.

Note 2.3, cont.

POLYGON 2018 71

NOTES

In Norway, the Group has agreements with franchisees under which Polygon receives commission on sales to end customers. Polygon issues an invoice for the entire amount to the end customer and receives an invoice from the franchisee for services rendered. The difference corre-sponds to the commission. These transactions are recognised net as sales revenue, meaning that the commission is recognised in sales revenue. Revenue from franchisees are not material from a Group perspective and Polygon has therefore decided not to report them as separate items in note 5.

INCOME TAXCurrent taxCurrent tax assets and liabilities for the current and prior periods are measured at the amount that is expected to be recovered from or paid to the respective tax authorities. The Group’s current tax is calculated using the tax rates and tax laws enacted or substantively enacted on the balance sheet date.

Current tax attributable to items recognised in equity and in other com-prehensive income is recognised in equity and in other comprehensive income and not in profit or loss.

Deferred taxDeferred tax is recognised on the balance sheet date in accordance with the balance sheet method for temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences:• except when the deferred tax liability arises as a result of impairment

of goodwill or when an asset or liability is recognised as part of a transaction that is not a business combination and which, at the time of the transaction, affects neither the recognised gain nor the taxable gain or loss, and

• for deductible temporary differences attributable to investments in subsidiaries, apart from cases where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not be reversed in the foreseeable future.

A deferred tax asset is recognised for deductible temporary differences, including loss carryforwards to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised.

The carrying amounts of deferred tax assets are reviewed on each balance sheet date and adjusted to the extent that it is no longer probable that sufficient taxable profit will be available to allow part of or the entire deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that apply for the period when the asset is realised or the liability is settled, based on the tax rates (and laws) that have been enacted or substantively enacted on the balance sheet date.

Deferred tax assets and liabilities are offset if there is a legally enforce-able right to offset current tax assets against current tax liabilities and the deferred tax amounts are related to the same entity in the Group and the same tax authority.

RECOGNITION OF CASH FLOWCash and cash equivalents consist of available cash, disposable bank deposits and other short-term investments with a remaining maturity of three months or less from the date of acquisition. Cash received and paid is recognised in the statement of cash flows. Cash flow from operating activities is recognised in accordance with the indirect method.

EVENTS AFTER THE BALANCE SHEET DATEEvents after the balance sheet date that confirm the existing terms as of the balance sheet date are taken into consideration in the measurement of assets and liabilities.

NOTE 2.4 KEY ACCOUNTING ASSESSMENTS, ESTIMATES AND ASSUMPTIONS

In preparing the financial statements in accordance with the applicable accounting policies, the Board and CEO are required to make certain estimates and assumptions that impact the carrying amounts of assets, liabilities, income and expenses. The areas where estimates and assump-tions are of material importance to the Group and which may affect the financial statements are described below:

IMPAIRMENT OF INTANGIBLE ASSETSIntangible assets other than goodwill and intangible assets with an indef-inite useful life are amortised over the period in which they will generate revenue, meaning their useful lives. If there is any indication that an asset may be impaired, the recoverable amount of the asset is calculated. The recoverable amount of an asset is the higher of its net realisable value and value in use. The recoverable amount is determined according to manage-ment’s estimates of future cash flows. The assumptions that have been made in the impairment test and related sensitivity analysis are further explained in Note 13 Impairment testing of goodwill and trademarks. The key assumptions relate primarily to assumptions about future sales and profit growth as well as assumptions about the discount rate.

Goodwill and intangible assets with an indefinite useful life are tested for impairment annually and whenever there is an indication that the asset may be impaired.

If the recoverable amount of the asset is less than its carrying amount, an impairment loss is recognised.

DEFERRED TAX ASSETSDeferred tax is recognised for temporary differences arising between the tax bases and carrying amounts of assets and liabilities as well as for unutilised loss carryforwards. A deferred tax asset is recognised only to the extent that it is probable it can be utilised against future profit. In the event that the actual outcome differs from the applied assumptions, or management adjusts these assumptions in the future, the value of the deferred tax assets could change.

REVENUE RECOGNITION BASED ON INDIVIDUAL ASSESSMENTThe Group applies the percentage of completion method on an individual basis for significant customer contracts, meaning contracts with a value of more than EUR 100 thousand and a term of more than three months. The estimate of total contract costs and revenue is critical for revenue recognition and provisions for onerous contracts, and the outcome of additional invoicing may affect profit.

PROVISIONS FOR EXPECTED CREDIT LOSSES ON ACCOUNTS RECEIVABLEAccounts receivable are initially recognised at transaction price in accordance with IFRS 15 and thereafter at amortised cost. A loss allow-ance for expected credit losses is made on every balance sheet date in an amount that corresponds to the expected credit losses for the remaining term. The assessment is based on criteria that show whether the risk has changed since the initial measurement date. Loss allowances for expected credit losses are recognised in profit or loss under other operating expenses. See Note 20 Accounts receivable.

PENSION AND OTHER POST-RETIREMENT BENEFITSDefined-benefit pension provisions are calculated based on actuarial calculations with assumptions about the discount rate, inflation, future salary increases and demographic factors. These assumptions are updated annually, which affects the size of the recognised provisions. The most significant assumptions relate to the discount rate and future salary increases. In the Swedish pension plans, mortgage bonds are used as the basis for the discount rate. The Group has determined that mortgage bonds constitute first-class corporate bonds that can be used as the basis for determining the discount rate.

Note 2.3, cont.

POLYGON 201872

NOTES

Company name Country of establishment Corp. ID No.

Participating interest Acquisition date Sales in EURm No. of employees

Villaklimat OBM AB Sweden 556637-3857 100% 31 Mar 2017 2.0 14

Polygon Nord AS Norway 956 827 264 100% 25 Sep 2017 5.0 47

Skadegruppen AS Norway 943 578 524 100% 26 Sep 2017 27.0 208

Bretagne Assèchement France 440 853 547 100% 28 Dec 2017 2.4 21

Bretagne Assèchement Nord France 503 279 697 100% 28 Dec 2017 2.2 22

Normandie Assistance France 499 557 478 100% 28 Dec 2017 0.5 4

Von Der Lieck GmbH & Co. KG Germany HRA 6565 100% 2 Jan 2018 4.0 25

Dansk Byggningskontrol A/S Denmark 31 85 98 83 66.4% 4 Jan 2018 29.0 236

Polygon Kongsberg AS Norway 884 251 192 100% 2 Jul 2018 1.7 17

Buskerud Skadebegrensning AS Norway 977 073 189 100% 3 Jul 2018 1.8 20

Refix Skadesanering AB Sweden 556858-0335 100% 1 Oct 2018 3.2 30

Neways Associates Ltd UK 4 373 558 100% 3 Oct 2018 6.1 54

NOTE 4 DIVESTED OPERATIONSNo operations were divested during 2018 or 2017.

NOTE 3 BUSINESS COMBINATIONS

The fair value of assets and liabilities identified on the acquisition date are presented below.

For acquisitions of service companies, not only is consideration paid for the net asset value of the company but also a surplus value, for example, for the acquisition of new customer relationships and knowledgeable, well-educated and experienced employees. A service company’s employees are its single most important value creator, but they are not recognised as an asset in the acquired businesses. Therefore, they represent the goodwill arising in the Polygon Group together with the expected synergies between existing and acquired units.

PolygonVatro GmbH acquired Von Der Lieck GmbH & Co (VDL) in October 2017 and the acquisition was closed on 2 January 2018. VDL strengthened Polygon’s position in the western region of Germany, close to the Dutch border.

Polygon A/S in Denmark acquired the shares of Dansk Bygning-skontrol A/S (DB) and the acquisition was closed on 4 January 2018. After a directed equity issue in Polygon A/S to the former owners of DB, Polygon’s participating interest in the Danish subgroup amounts to 66.4%. The acquisition strengthened Polygon’s position in Denmark since DB was three times larger than the existing operations in Denmark on the acquisition date. The acquisition is expected to generate synergies between the two companies in Denmark and result in a significantly more efficient organisation.

In January 2018, Polygon AS in Norway acquired minority shares in four franchise partners, with a call option to increase the ownership to 100%. In early July 2018, this call option was exercised for two of these companies: Buskerud Skadebegrensning AS and Kongsberg AS. Both companies were merged with Polygon AS during the autumn. The acquisition analysis for Skadegruppen AS, which was acquired in 2017 and closed on 1 November 2017, was adjusted in an amount of EUR 658 thousand in 2018 due to requirements concerning project completion prior to closing.

Polygon Sverige AB acquired 100% of the shares in Refix Skadesanering AB and the acquisition was closed on 1 October 2018. The acquisition strengthened Polygon Sverige’s position in fire damage restoration.

Polygon UK acquired 100% of the shares in Neways Associates and the acquisition was closed on 3 October 2018. The acquisition has enabled Polygon UK to offer a full-service concept in the area of property damage repair and restoration.

Polygon Sverige conducted two minor acquisitions of assets and liabilities during the financial year (Metodia AB and Caliber Sanering AB).

At the beginning of the financial year, Polygon International AB acquired a minority interest in Caption Data Ltd (CDL) in the UK. The acquisition provided Polygon with an opportunity to influence and participate in digitalisation of the industry, since CDL is a world leader in the development of remote monitoring applications, such as solutions for humidity control.

The amounts and assessments below pertaining to acquisitions in 2017 are final, while the amounts and assessments for 2018 are preliminary.

BUSINESS COMBINATIONS IN 2017 AND 2018

Fair value on acquisition 2018 2017

Customer relationships 13,121 –

Trademarks 790 –

Acquired order value 104 –

Machinery and equipment 1,148 1,079

Other non-current receivables 3,851 31

Inventories 13,928 4,088

Current receivables 71 5,974

Total assets 33,013 11,172 Non-current liabilities and other liabilities 4,259 –

Operating liabilities 7,168 7,464

Deferred tax liabilities 473 384

Less: Cash and bank balances –654 –3,219

Total liabilities net of cash 11,247 4,629 Net assets 21,767 6,543 Non-controlling interests –10,523 –

Negative goodwill – -3,334

Goodwill 23,773 9,076

Total purchase consideration 35,017 12,285

2018 2017

Purchase considerationCash payment 32,408 11,562

Liabilities assumed 156 –

Liability to seller 2,453 723

Total purchase consideration 35,017 12,285

Analysis of cash-flow effects from acquisitions:Acquired cash and cash equivalents –654 –3,219

Cash payment 32,408 11,562

Exchange differences – –

Net cash flow from the acquisition 31,754 8,343

AQUIRED ASSOCIATED COMPANIES

Company name Country of establishment Corp. ID No.

Participating interest Acquisition date

Polygon Haugesund AS Norway 979 489 986 49% 3 Jan 2018

Polygon Innlandet AS Norway 975 843 777 40% 3 Jan 2018

Caption Data Limited UK 6 557 609 20% 6 Feb 2018

POLYGON 2018 73

NOTES

NOTE 5 SEGMENT INFORMATIONThe Group has three operating segments that are divided by geographical market. IFRS is applied by all segments and by the Group as a whole.

2018 Nordics & UKContinental

Europe North America Other Eliminations Group total

Revenue from external customers 202,690 381,850 34,724 – – 619,264

Revenue from internal customers – 867 – – –867 –

Total revenue 202,690 382,717 34,724 – –867 619,264 Operating profit 1,546 17,177 3,534 3,074 – 25,331 Net financial items – – – – – –14,595

Tax – – – – – –4,233

Profit for the year – – – – – 6,503 Depreciation and amortisation 8,047 8,521 2,450 966 – 19,984 Assets 145,574 179,610 33,404 153,247 –84,757 427,078

of which goodwill 68,776 49,580 18,770 – – 137,126

Liabilities 85,748 105,671 25,098 219,827 –84,757 351,587

Capital expenditures

Property, plant and equipment 3,023 9,688 3,658 –81 – 16,288

Intangible assets 663 662 – 914 – 2,239

Sales by service Nordics & UKContinental

Europe North America Group total

Water damage restoration 124,311 193,693 9,814 327,818

Fire damage restoration 68,647 179,101 516 248,264

Humidity control 9,732 9,056 24,394 43,182

Total sales 202,690 381,850 34,724 619,264

2017

Revenue from external customers 144,043 335,772 32,615 – – 512,429

Revenue from internal customers 10 150 4 – –164 –

Total revenue 144,053 335,922 32,618 – –164 512,429 Operating profit/loss 5,966 16,943 4,054 –1,525 – 25,438 Net financial items – – – – – –16,946

Tax – – – – – –3,024

Profit for the year – – – – – 5,468 Depreciation and amortisation 2,578 7,216 1,857 3,011 – 14,662 Assets 101,243 170,524 31,402 144,665 –82,613 365,221

of which goodwill 46,742 46,014 18,186 – – 110,942

Liabilities 65,187 105,892 23,563 193,438 –82,613 305,467

Capital expenditures

Property, plant and equipment 2,769 9,625 4,531 – – 16,925

Intangible assets – 137 – 2,252 – 2,389

Sales by service Nordics & UKContinental

Europe North America Group total

Water damage restoration 82,288 169,563 9,753 261,604

Fire damage restoration 52,970 157,334 618 210,922

Humidity control 8,785 8,874 22,244 39,903

Total sales 144,043 335,771 32,615 512,429

SALES BY COUNTRYThe figures for revenue are based on the country where the customer is located and from which the sales derive.

Geographical region 2018 2017

Sweden 22,172 19,813

Germany 334,645 293,191

Other 262,447 199,425

Total 619,264 512,429

NOTE 6 BREAKDOWN OF EXPENSES BY CATEGORY

2018 2017

Personnel costs 219,327 176,280

Subcontractor costs 220,720 190,091

Other operating costs 97,577 79,564

Depreciation and amortisation/disposals 19,984 14,662

Other operating expenses 33,544 28,516

Capital gains (-)/ losses/impairment 1,239 420

Negative goodwill 658 –3,992

Acquisition-related costs 884 1,450

Total 593,933 486,991

The expenses above are included in the cost of services sold, selling and administrative expenses, and other operating expenses.

POLYGON 201874

NOTES

NOTE 7 AUDIT FEES2018 2017

Ernst & Young

Audit assignment 527 527

Audit activities in addition to audit assignment 300 42

Tax consultancy 38 46

Other services 4 5

Other auditing firms

Audit assignment 18 18

Audit activities in addition to audit assignment 105 5

Tax consultancy 176 175

Other services 74 30

Total audit fees 1,242 848

Audit assignment refers to auditing of the annual report and financial accounts and the administration by the Board as well as other audit tasks that are incumbent upon the company’s auditors.

NOTE 8 SALARIES, SOCIAL SECURITY EXPENSES AND EMPLOYEE BENEFITS

2018 2017Average no. of employees per country

No. of employees

Of whom men, %

No. of employees

Of whom men, %

Sweden 213 79 166 84

Norway 384 84 454 81

Finland 277 85 277 88

Denmark 331 67 94 69

Belgium 41 90 39 82

Austria 102 86 97 88

Germany 1,710 77 1,455 76

France 85 76 92 75

UK 437 79 371 75

Netherlands 131 85 120 83

Singapore 4 75 4 75

USA 90 83 85 85

Canada 31 65 25 68

Group total 3,836 79 3,279 79

SALARIES, SOCIAL SECURITY EXPENSES AND EMPLOYEE BENEFITS

2018 2017

Salaries and other

employee benefitsSocial security

expenses(of which pension)

Salaries and other employee benefits

Social security expenses

(of which pension)

Parent Company 2,707 513 135 2,082 470 526

Subsidiaries 164,412 35,853 6,596 133,120 30,051 5,288

Group total 167,119 36,366 6,731 135,202 30,521 5,814

BREAKDOWN OF SALARIES, SOCIAL SECURITY EXPENSES AND OTHER EMPLOYEE BENEFITS BETWEEN THE BOARD OF DIRECTORS, THE CEO AND OTHER EMPLOYEES

2018 2017

Salaries and other

employee benefits(of which

bonuses, etc.)Social security

expensesSalaries and other

employee benefits(of which

bonuses, etc.)Social security

expenses

Board of Directors 262 – 47 231 – 37

CEO 1,343 410 8 916 499 –

Other employees 165,514 7,623 36,311 134,055 5,741 30,484

Group total 167,119 8,033 36,366 135,202 6,240 30,521

REMUNERATION TO BOARD MEMBERS

2018 2017

Board member RemunerationSocial security

expenses RemunerationSocial security

expenses

Luc Hendriks Chairman 60 – 60 –

Ole Skov Board member 30 9 30 9

Jonas Samuelson Board member, Chairman of audit committee 45 15 45 14

Petter Darin Board member, audit committee member 37 12 38 12

Lars-Ove Håkansson Board member 30 2 30 2

Nadia Meier-Kirner Board member 30 – 28 –

Gunilla Andersson Board member, elected in December 2017 30 9 – –

Lars Blecko Board member, elected in December 2018 – – – –

Total 262 47 231 37

A fee of EUR 60 thousand is paid to the Chairman of the Board and a fee of EUR 30 thousand is paid to each Board member per full year. A fee of EUR 15 thousand is paid to the Chairman of the audit committee and a fee of EUR 7.5 thousand is paid to each audit committee member per full year.

POLYGON 2018 75

NOTES

NOTE 9 FINANCIAL INCOME AND EXPENSES

Financial income 2018 2017

Interest income 91 151

Total financial income 91 151

Financial expenses 2017 2016

Interest expenses –9,696 –9,798

Financial exchange differences –112 –5,397

Other financial expenses –4,879 –1,902

Total financial expenses –14,686 –17,097

Net financial items –14,595 –16,946

NOTE 10 TAXThe main components of the tax expense are as follows:

2018 2017

Consolidated income statementCurrent tax on profit for the year –3,896 –3,219

Tax on capital gains not recognised in profit or loss –434 –323

Adjustments for prior years 1,704 327

–2,626 –3,215

Change in deferred tax on temporary differences –1,731 –34

Other 124 225

Tax expense recognised in profit or loss –4,233 –3,024

2018 2017

Reconciliation of effective tax rateProfit before tax 10,736 8,492 Tax according to the applicable tax rate for the Parent Company, 22% –2,362 –1,868

Tax attributable to foreign tax rates –1,027 –973

Non-deductible expenses –1,057 –812

Change in non-capitalised loss carryforwards –3,676 –1,369

Non-taxable revenue 1,284 386

Taxable revenue not recognised in profit or loss –434 –323

Tax attributable to prior years 1,704 327

Other 1,335 1,608

Total tax expense –4,233 –3,024

The growing share of earnings from Germany, where the tax rate is 30%, impacted the Group’s tax expense and resulted in ongoing caution when recognising deferred tax assets for loss carryforwards.

The recognised effective tax rate is 39.4% (35.6). The average tax rates in the countries where the Group operates is approximately 22%.

GENDER DISTRIBUTION ON THE BOARD AND AMONG SENIOR EXECUTIVES

2018 2017

Distribution of men and women on the Board

Women 2 2

Men 5 5

Distribution of men and women among the CEO and other senior executives in the Group1)

Women – –

Men 7 7

1) In 2018, senior executives in the Group comprised the CEO, COO, CCO and CFO as well as three country managers.

2018 2017

Remuneration to Group managementSalaries and other benefits 3,738 3,248

Pension and remuneration for medical care 151 423

Total 3,889 3,671

Salaries to the CEO and other senior executives are established by the Board. Salary level is to be based on market conditions in relation to qualifications and performance. In addition to fixed salary, remuneration may include a maximum bonus of 100% of fixed salary. The outcome of the bonus is mainly based on the attainment of financial targets.

The company uses only premium-based pension solutions for senior executives. These pension solutions vary between 15% and 35% of annual fixed salary.

The notice period for senior executives is between six and 12 months, plus six months of termination benefits that cover only fixed salary. The CEO has a notice period of six months and termination benefits are paid during this period. In the event of termination of employment on the part of the company, the notice period is six months.

Other benefits include company car benefits, car allowances and health insurance.

The outgoing CEO received severance pay corresponding to six months, a bonus corresponding to 50% of annual salary and a lump sum of EUR 130 thousand in accordance with the termination agreement.

Note 8, cont.

POLYGON 201876

NOTES

2018 2017

Loss carryforwards Maturity date

0–1 year – –

1–2 years – –

2–3 years 37 –

3–4 years – –

4–5 years 349 –

>5 years 22,980 19,719

No maturity date 49,024 50,483

Total loss carryforwards 72,040 70,202

Loss carryforwards at year-end totalled EUR 72.0 million (70.2), corre-sponding to a tax amount of EUR 18.7 million (21.3). Loss carryforwards for which a deferred tax asset has not been recognised amounted to EUR 31.5 million (34.7). Accordingly, loss carryforwards of EUR 40.5 million (35.5) are subject to recognition of deferred tax assets.

NOTE 11 GOODWILL2018 2017

Opening balance cost 119,338 112,953

Acquisitions 26,647 8,315

Exchange differences –307 –1,930

Closing balance cost 145,678 119,338 Opening balance impairment –8,396 –8,771

Exchange differences –156 375

Closing balance accumulated impairment –8,552 –8,396 Net carrying amount 137,126 110,942

Note 10, cont.

DEFERRED TAX ASSET/TAX LIABILITY The deferred tax asset and provision recognised in the balance sheet are attributable to the following assets and liabilities:

2018 2017Deferred tax asset

Deferred tax liability Net

Deferred tax asset

Deferred tax liability Net

Intangible assets – 14,060 –14,060 – 11,871 –11,871

Machinery and equipment 217 924 –707 355 2,104 –1,749

Contract assets and liabilities 847 732 115 2,723 603 2,120

Accounts receivable 320 2,566 –2,246 228 3,135 –2,907

Provisions 258 – 258 726 34 692

Other liabilities 116 – 116 267 1 266

Loss carryforwards 10,524 – 10,524 12,363 – 12,363

Provision for pensions 1,161 – 1,161 1,125 – 1,125

Other 5 262 –257 945 46 899

Total 13,448 18,544 –5,096 18,732 17,794 938Offsetting in companies –73 –73 – –1,988 –1,988 –

Opening balance 13,375 18,471 –5,096 16,744 15,806 938

FÖRÄNDRING AV UPPSKJUTEN SKATT I TEMPORÄRA SKILLNADER OCH UNDERSKOTTSAVDRAG

2018 Opening balance AcquisionsDisclosed in

income statementDisclosed in other

comprehensive incomeExchange

differencesClosing balance

Intangible assets –11,871 –3,408 1,219 – – –14,060

Plant and machinery –1,749 –37 1,079 – – –707

Contract assets and liabilities 2,120 –450 –1,555 – – 115

Accounts receivables –2,907 – 661 – – –2,246

Provisions 692 41 –475 – – 258

Non-current liablities 266 – –150 – – 116

Loss carry-forward 12,363 – –1,839 – – 10,524

Provisions for pensions 1,125 – – 36 – 1,161

Other 899 – –859 – –297 –257

Total 938 –3,854 –1,919 36 –297 –5,096

2017 Opening balance AcquisionsDisclosed in

income statementDisclosed in other

comprehensive incomeExchange

differencesClosing balance

Intangible assets –11,807 –889 825 – – –11,871

Plant and machinery 573 203 –2,525 – – –1,749

Contract assets and liabilities –8,159 –267 10,549 – –3 2,120

Accounts receivables 5,873 59 –8,839 – – –2,907

Provisions 8 – 684 – – 692

Non-Ccurrent liabilities –106 – 372 – – 266

Loss carry-forward 14,530 493 –2,660 – – 12,363

Provisons for pensions 1,107 – – 18 – 1,125

Other –713 – 1,703 – –91 899

Total 1,306 –401 109 18 –94 938

Uppskjutna skattefordringar avseende underskottsavdrag redovisas i den omfattning det bedömts sannolikt att de framöver kommer att kunna utnyttjas mot skattepliktiga överskott.

POLYGON 2018 77

NOTES

NOTE 12 OTHER INTANGIBLE ASSETS

2018 Trademarks Order backlogCustomer

relationships Other Total

Opening cost 25,821 8,914 40,157 18,132 93,024

Acquired companies 930 123 15,806 3,357 20,217

Acquisitions – – – 2,239 2,239

Divestments/disposals – – – –395 –395

Exchange differences –202 –3 –178 –4 –387

Closing balance cost 26,549 9,034 55,785 23,329 114,697 Opening amortisation –159 –8,914 –29,997 –7,220 –46,290

Amortisation –93 –123 –5,859 –2,650 –8,725

Divestments/disposals – – – 287 287

Exchange differences –7 3 82 –1 77

Closing balance accumulated amortisation –259 –9,034 –35,774 –9,584 –54,651 Opening impairment – – – –4,774 –4,774

Impairment - – – –1,943 –1,943

Closing balance accumulated impairment – – – –6,717 –6,717 Net carrying amount 26,290 – 20,011 7,028 53,329

2017 Trademarks Order backlogCustomer

relationships Other Total

Opening cost 25,885 9,018 40,327 15,910 91,140

Acquired companies – – – 53 53

Acquisitions – – – 2,389 2,389

Divestments/disposals – – – –179 –179

Exchange differences –64 –104 –170 –41 –379

Closing balance cost 25,821 8,914 40,157 18,132 93,024 Opening amortisation –181 –9,018 –25,629 –6,479 –41,307

Amortisation – – –4,414 –954 –5,368

Divestments/disposals – – – 179 179

Exchange differences 22 104 46 34 206

Closing balance accumulated amortisation –159 –8,914 –29,997 –7,220 –46,290 Opening impairment – – – –4,274 –4,274

Impairment – – – –500 –500

Closing balance accumulated impairment – – – –4,774 –4,774 Net carrying amount 25,662 – 10,160 6,138 41,960

In the income statement, amortisation of EUR 1.3 million (0.0) is included in the cost of services sold, EUR 7.2 million (5.3) in selling and administrative expenses and EUR 0.2 million (0.1) in other operating expenses. The impairment loss primarily pertained to development costs for internal computer systems that have been put into operation and amounted to EUR 1.9 million (0.5).

NOTE 13 IMPAIRMENT TESTING OF GOODWILL AND TRADEMARKSPolygon has three operating segments that comprise cash-generating units.

Goodwill and other intangible assets with indefinite useful lives acquired through business combinations are specified in the table below.

2018 2017 Goodwill Trademarks Goodwill Trademarks

Nordics & UK 68,776 5,517 46,742 5,830

Continental Europe 49,580 20,668 46,014 19,831

North America 18,770 105 18,186 1

Total 137,126 26,290 110,942 25,662

Polygon’s impairment test for goodwill and trademarks was performed through an estimation of value in use. This calculation includes several assumptions about future conditions and estimates of parameters such as discount rate, growth rate, and salary and overhead levels. Changes in these assumptions and estimates could affect the carrying amount of

goodwill. Value in use is determined through cash flow calculations, where the first five years are based on the five-year business forecast established by management. This assessment is based on country- specific market assessments, competition analyses and product mix development. The cash flows estimated after the first five years are based on an annual growth rate of 2% (2), which is assessed to corre-spond to the long-term growth in the unit’s markets.

The discount rate was determined based on the Group’s weighted average cost of capital (WACC), which is based on assumptions con-cerning the interest rate on long-term government bonds as well as the company-specific risk factor and beta value.

The estimated cash flows have been discounted to present value using a discount rate (WACC) of 11.8% (11.4) before tax. The conclusion of the impairment test is that there is no indication of impairment, since value in use exceeds the carrying amount including goodwill and other intangible assets.

Should the company be unable to achieve the business plan on which the cash flow calculations are based, this could lead to impairment.

POLYGON 201878

NOTES

NOTE 14 PROPERTY, PLANT AND EQUIPMENT

Land and buildings 2018 2017


Exchange differences –11 –15

Closing balance cost 2,784 2,795 Opening balance depreciation –1,392 –1,341

Depreciation for the current year –317 –57

Exchange differences 6 6

Closing balance accumulated amortisation –1,703 –1,392 Net carrying amount 1,081 1,403

Plant and machinery 2018 2017


Acquired companies 1,301 994

Acquisitions 16,288 16,925

Divestments/disposals –3,362 –2,583

Reclassification – 7

Exchange differences 131 –4,175

Closing balance cost 161,834 147,475 Opening balance depreciation –108,009 –103,909

Amortisation –10,756 –9,236

Divestments/disposals 2,460 2,529

Exchange differences 241 2,607

Closing balance accumulated amortisation –116,064 –108,009 Opening balance impairment –669 –615

Impairment –85 –58

Exchange differences 4 4

Closing balance accumulated impairment –750 –669

Net carrying amount 45,020 38,797

In the income statement, depreciation of EUR 8.9 million (7.8) is included in the cost of services sold, EUR 1.9 million (1.4) in selling and administra-tive expenses and EUR 0.5 million (0.2) in other operating expenses.

NOTE 15 CONTRACT ASSETS AND LIABILITIES

Contract assets and liabilities 2018 2017

Contract assetsOpening balance 28,246 34,012

Transfers from contract assets recognised in opening balance to receivables –26,995 –32,524

Increases as a result of changes in the measure of progress in projects 514,855 444,007

Transfers from contract assets recognised during the year to receivables –478,325 –421,369

Business combination 7,269 4,468

Revaluation –118 –65

Translation difference –202 –283

Closing balance 44,730 28,246

Contract liabilitiesOpening balance 876 1,005

Revenue recognised that was included in the liability balance at the beginning of the period – –5

Increases due to cash received, excluding amounts recognised as revenue during the period 369 –124

Transfers from contract liabilies recognised during the year to revenue –876 –

Closing balance 369 876

Most of the assignments Polygon receives are carried out over a short period of between one and four months and the average contract amount is EUR 2 thousand. Polygon receives a large number of orders and man-ages them using the portfolio approach with an average contract margin. A small portion of Polygon’s projects continue for a longer period and have a higher contract amount. These projects are recognised individually on an ongoing basis using the %age of completion method. These projects accounted for 11% (12) of total sales for the year.

NOTE 16 PREPAID EXPENSES AND ACCRUED INCOME

2018 2017

Prepaid insurance 637 512

Prepaid rent 832 641

Prepaid service 1,557 1,172

Leases 753 628

Employee-related costs 212 963

Other prepaid expenses 1,485 1,686

Total 5,476 5,602

POLYGON 2018 79

NOTES

NOTE 17 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

FINANCIAL RISK MANAGEMENT IN THE POLYGON GROUPPolygon is exposed to a number of financial market risks that the Group is responsible for managing under the finance policy approved by the Board of Directors. The overall objective is to have cost-effective funding in the Group. The financial risks in the Group are mainly managed in relation to the Group’s functional currency, which is EUR. The impact of the finan-

cial risks on the Group’s earnings is mainly managed through a weekly exchange of non-EUR cash into EUR and, to only a limited extent, through the use of financial instruments. The main risk exposures for the Group are liquidity risk, interest rate risk, currency risk, credit risk and counterparty risk.

The table below shows the Group’s significant assets and liabilities.

2018 2017 Carrying amount Fair value Carrying amount Fair value

Financial assets Accounts receivable 88,369 88,369 76,570 76,570

Other current receivables 2,963 2,963 2,522 2,522

Receivables from Parent Company 315 315 308 308

Cash and bank balances 33,192 33,192 42,541 42,541

Hedging 93 93 – –

Total 124,932 124,932 121,941 121,941

Financial liabilitiesInterest-bearing non-current liabilities 208,632 212,778 177,796 180,000

Other non-current liabilities 6,153 6,153 5,593 5,593

Interest-bearing current liabilities – – 819 819

Bank overdraft facility – – 885 885

Accounts payable 45,550 45,550 35,647 35,647

Other liabilities 20,308 20,308 16,756 16,756

Accrued expenses 1,866 1,866 1,900 1,900

Hedging – – 202 202

Total 282,509 286,655 239,598 241,802

CURRENCY RISKAs a result of its international operations, Polygon is impacted by changes in foreign exchange rates. The following table shows the currency exposure for the various financial assets and liabilities.

BREAKDOWN OF GROUP LOANS BY CURRENCY

2018 2017

EUR 212,006 184,275

DKK 2,779 –

Total 214,785 184,275

BREAKDOWN OF ACCOUNTS RECEIVABLE BY CURRENCY

2018 2017

EUR 56,250 54,387

SEK 3,363 2,834

USD 6,346 4,732

NOK 7,924 7,369

GBP 7,035 4,541

Other currencies 7,451 2,707

Total 88,369 76,570

BREAKDOWN OF OTHER CURRENT RECEIVABLES BY CURRENCY

2018 2017

EUR 1,940 1,540

SEK 481 324

USD 60 84

NOK 122 85

GBP 353 395

Other currencies 7 94

Total 2,963 2,522

BREAKDOWN OF CASH AND BANK BALANCES BY CURRENCY

2018 2017

EUR 16,906 20,924

SEK 1,359 1,612

USD 4,781 4,850

NOK 5,878 6,051

DKK –128 601

GBP 3,446 7,957

Other currencies 950 546

Total 33,192 42,541

The amounts above pertain to receivables from banks.

BREAKDOWN OF ACCOUNTS PAYABLES BY CURRENCY

2018 2017

EUR 28,373 24,096

SEK 2,512 1,934

USD 2,014 2,043

NOK 5,051 3,624

GBP 6,068 3,073

Other currencies 1,532 877

Total 45,550 35,647

BREAKDOWN OF CURRENT LIABILITIES BY CURRENCY

2018 2017

EUR 11,047 12,073

SEK 880 529

NOK 2,814 3,222

GBP 3,679 883

Other currencies 1,888 251

Total 20,308 16,958

POLYGON 201880

NOTES

BREAKDOWN OF DEFERRED INTEREST EXPENSES BY CURRENCY

2018 2017

EUR 1,866 1,900

Total 1,866 1,900

TRANSACTION EXPOSUREThe Polygon Group’s policy for transaction exposure is to minimise the impact of short-term changes in foreign exchange rates for currencies other than EUR by hedging the transaction exposure on a case-by-case basis.

The main transaction exposures arise in EUR against local currencies.

CURRENCY EXPOSUREPolygon’s assets in foreign subsidiaries are financed through loans or equity. If a foreign subsidiary that has a reporting currency other than EUR is financed through equity, a translation risk arises in connection with the translation of the subsidiary’s balance sheet. Translation risk is the risk that changes in foreign exchange rates will negatively impact Polygon’s net assets in foreign operations in connection with the translation of the foreign units’ income statements and balance sheets. Currency effects arising on translation are recognised in the consolidated statement of other comprehensive income.

Since many significant subsidiaries have EUR as their functional currency, the Group’s translation risk is very limited. The table below shows the impact of changes in foreign exchange rates on the net assets of subsidiaries in each currency:

2018 2017

Change in USD exchange rate+10/-10% 480 611

Change in NOK exchange rate+10/-10% 361 509

Change in GBP exchange rate+10/-10% 614 626

Change in SEK exchange rate+10/-10% 665 570

TRANSACTION RISK AND HEDGES IN THE MAIN CURRENCIES Polygon has outstanding hedges for its transaction exposure in SEK/EUR. Hedge accounting is not applied.

INTEREST RATE RISKFluctuations in interest rates impact the Group’s interest expenses. Polygon’s policy for interest rate risk is designed to reduce the impact of interest rate changes on earnings. In the case of interest-bearing assets, the fixed interest period is to be short and matched against repayment of loans. On the balance sheet date, Polygon had no interest rate hedges in the form of interest rate swaps or interest rate caps.

At 31 December 2018, a simultaneous change in interest rates of +/-1 % age point, excluding interest rate hedges, would have impacted annual net interest expenses by EUR 2.1 million (1.8), assuming that the Group’s duration and funding structure remain constant during the year.

The variable rate interest-bearing net liability position for the Group as a whole, including cash and bank balances, was EUR 181.6 million (142.6).

CUSTOMER CREDIT RISKManagement’s assessment is that there is no significant concentration of credit risk with any individual customer, counterparty or geographical region for Polygon. An age analysis of accounts receivable is presented in Note 20 Accounts receivable.

LIQUIDITY AND REFINANCING RISKFinancing risks refer to the risk of difficulty in obtaining financing for operations at a given point in time. Polygon’s finance policy states that the Group’s external loan portfolio is to have a maturity structure that guarantees that Polygon will not be exposed to refinancing risks.

Polygon is also subject to covenants that are specified in the terms and conditions of the bond and in the terms and conditions of the bank overdraft facility, such as key ratios and performance measures linked to the consolidated income statement and balance sheet. These covenants were fulfilled for 2018 and 2017.

CAPITAL RISK MANAGEMENTThe Group’s capital structure should be maintained at a level that ensures the ability to advance the business in order to generate returns for the shareholders and benefits for other stakeholders, while at the same time maintaining an optimal capital structure to reduce capital costs.

To maintain or adjust the capital structure, the Group may, upon approval by the shareholders and external lenders when appropriate, vary the dividend that is paid to the shareholders, reduce the share capital to enable payments to the shareholders, issue new shares or sell assets to reduce its debt. The Group continuously analyses the relationship between debt and equity as well as the relationship between debt and equity including loans from shareholders.

EUR thousand 2018 2017

Interest-bearing net debt (A) 175,441 136,958

Total equity (B) 75,491 59,754

Debt/equity ratio (A/B) 2.3 2.3

EUR thousand 2018 2017

Interest-bearing net debt, incl. loans from shareholders (A) 181,594 142,551

Total equity (B) 75,491 59,754

Debt/equity ratio (A/B) 2.4 2.4

NOTE 18 INTEREST-BEARING LOANS AND BORROWINGSThe table below shows the Group’s various loans and borrowings, including interest rate hedging.

2018 2017

Non-current:

Bond (fixed rate) 210,000 –

Bond and other (variable rate) 2,778 180,000

Financing costs1) –4,146 –2,204

Shareholder loans 6,153 5,593

Total interest-bearing non-current loans and borrowings 214,785 183,389 Current:

Other bank loans – 885

Total interest-bearing current loans and borrowings – 885 Loan amount 214,785 184,274

1) Financing costs are allocated over the duration of the loans.

MATURITY DATES FOR FINANCIAL LIABILITIES ARE AS FOLLOWS:

Carrying amount Undiscounted cash flows 2018 2017 2018 2017

Within 1 year 67,731 53,483 69,802 55,476

Between 2 and 5 years 208,626 180,323 210,026 181,596

After 5 years 6,153 5,593 12,455 11,323

Total 282,510 239,399 292,283 248,395

The carrying amounts above include financial liabilities. The non- discounted cash flows above include financial liabilities and interest payments. All amounts in currencies other than EUR are translated at the closing day rate and interest payments on loans with variable interest have been calculated at the closing day rate.

The weighted average interest rate on external loans and borrowings, including margins and the effects of interest rate hedges, was 4.00% (5.00).

Note 17, cont.

POLYGON 2018 81

NOTES

BREAKDOWN OF FINANCIAL ASSETS AND LIABILITIES RECOGNISED AT FAIR VALUE:

2018 Derivative

instruments

Additional purchase

price

Total carrying amount Fair value

Measurement classification Level 2 Level 3

ASSETSCurrent receivablesOther current assets 93 – 93 93

Total financial assets 93 – 93 93

LIABILITIESCurrent liabilitiesOther current liabilities – 3,085 3,085 3,085

Total financial liabilities – 3,085 3,085 3,085

2017Derivative

instruments

Additional purchase

price

Total carrying amount Fair value

Measurement classification Level 2 Level 3LIABILITIESNon-current liabilitiesOther non-current liabilities – 692 692 692

Current liabilities – – – – Other current liabilities 202 615 817 817

Total financial liabilities 202 1,307 1,509 1,509

The Group categorises financial assets and financial liabilities that are measured at fair value in a fair value hierarchy based on the inputs that are used to measure each asset and liability.

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Quoted prices in markets that are not active, quoted prices for similar assets or liabilities, inputs other than quoted prices that are observable, directly or indirectly, for essentially the instrument’s entire duration as well as the inputs used in valuation techniques that have been derived from observable market data.

Level 3 – Inputs that are essential for the fair value of the asset or liability are not observable, and the Group’s own assessments are instead applied.

Financial liabilities at level 3 consist of additional purchase prices for acquired operations. The measurement of this is based on the acquired operations’ expected future financial performance, which has been assessed by management.

Specification of financial assets and liabilities 2018 2017

Financial assets Opening balance – 113

Change in market value of hedges during the year 93 –113

Opening balance 93 – Financial liabilities Opening balance 1,509 –

Change in additional purchase prices 1,778 1,307

Change in market value of interest rate hedges during the year –202 202

Opening balance 3,085 1,509

The average maturity of the currency hedges is six months.

NOTE 19 CASH AND BANK BALANCES2018 2017

Bank balances and cash funds 33,192 42,541

Total 33,192 42,541

At year-end, the Group had EUR 69.1 million (60.9) available in unutilised loan commitments, for which all covenants have been met.

NOTE 20 ACCOUNTS RECEIVABLE2018 2017

Accounts receivable 93,934 81,387

Provision for bad debts –5,565 –4,817

Total 88,369 76,570

No pledged assets (collateral) have been received for accounts receivable.

AGE ANALYSIS OF ACCOUNTS RECEIVABLE

2018

Accounts receivable

gross

Provision for doubtful

accounts

Accounts receivable

net

<30 days past due 22,922 – 22,922

31–60 days past due 10,100 – 10,100

61–90 days past due 4,615 – 4,615

91–180 days past due 6,520 – 6,520

>181 days past due 6,143 –5,565 578

Total past due receivables 50,300 –5,565 44,735 Receivables not past due 43,634 – 43,634

Total 93,934 –5,565 88,369

2017

Accounts receivable

gross

Provision for doubtful

accounts

Accounts receivable

net

<30 days past due 19,258 – 19,258

31–60 days past due 7,418 – 7,418

61–90 days past due 3,791 – 3,791

91–180 days past due 4,519 – 4,519

>181 days past due 5,974 –4,817 1,157

Total past due receivables 40,960 –4,817 36,143 Receivables not past due 40,427 – 40,427

Total 81,387 –4,817 76,570

PROVISION FOR EXPECTED BAD DEBT LOSSES

2018 2017


Acquired companies 196 324

Change in provision during the year 1,153 702

Reversal of previous provisions –283 –144

Realised loss on previously reserved accounts receivable –309 –77



The review carried out prior to the implementation of the new standardconfirmed that the new standard would not have a material impact on thefinancial statements. Polygon has therefore not carried out any remea-surement that impacted the opening equity for 2018.

Note 18, cont.

POLYGON 201882

NOTES

NOTE 21 PLEDGED ASSETS FOR OWN LIABILITIES AND PROVISIONS

2018 2017

Shares in subsidiaries 459,638 399,181

Pledged assets for own liabilities and provisions 459,638 399,181

All shares in the Group’s major subsidiaries and the Group’s internal loans are pledged as collateral for the Group’s bond. The amounts presented under pledged assets correspond to the total net assets in the pledged subsidiaries.

NOTE 22 FINANCE AND OPERATING LEASES

FINANCE LEASE OBLIGATIONSThe finance lease obligations pertain to cars in Denmark. These obligations have an average term of four years and include an option to acquire the object after the end of the lease term.

2018 2017

Less than 1 year 1,007 –

1–2 years 672 –

2–3 years 482 –

3–4 years 345 –

4–5 years 278 –

More than 5 years – –

Future lease payments 2,784 –

PRESENT VALUE OF FUTURE LEASE PAYMENTS

2018 2017

Less than 1 year 967 –

1–2 years 619 –

2–3 years 426 –

3–4 years 293 –

4–5 years 227 –

More than 5 years – –

Total 2,532 –

OPERATING LEASE OBLIGATIONSThe operating lease obligations primarily pertain to premises, service vehicles, computers and office equipment. These obligations have an average term of one to five years and do not include an option to acquire the object. The Group is not currently subject to any restrictions as a result of these obligations. During the year, the lease cost amounted to EUR 29.9 million (25.6).

2018 2017

Rent for premises 13,132 11,269

Car leases 13,791 12,740

Other operating leases 3,005 1,609

Total 29,928 25,618

MINIMUM LEASE PAYMENTS

2018 2017

Less than 1 year 29,222 24,462

1–2 years 20,762 18,454

2–3 years 15,360 12,724

3–4 years 10,365 8,563

4–5 years 7,255 5,964

More than 5 years 5,491 6,762

Future lease payments 88,455 76,929

NOTE 23 OTHER LIABILITIES2018 2017

VAT 13,015 11,551

Employee withholding tax 3,206 2,819

Other liabilities 4,087 2,587

Total 20,308 16,958

NOTE 24 EQUITYSHARE CAPITALEach share has a quotient value of EUR 10.27 per share. All shares are of the same class and carry the same voting rights. All shares are paid in full. All shares carry the same entitlement to the company’s assets and profit. There are no restrictions on the transferability of the shares according to the law or the Articles of Association.

OTHER CONTRIBUTED CAPITALOther contributed capital pertains to equity contributed by the owners and includes share premium reserves.

In accordance with Chapter 4, Section 2, Paragraph 2 of the Swedish Annual Accounts Act, the wholly owned subsidiary Polygon International AB has had a fund for development costs in restricted equity since 2016. The fund amounted to EUR 2.7 million (4.0) at 31 December 2018. This amount is not available for distribution.

HEDGING RESERVEThe hedging reserve refers to accumulated gains and losses arising from changes in the fair value of cash flow hedges attributable to hedges of exchange rate fluctuations and interest rate risks. At the end of the year, there were no cash flow hedges recognised in other comprehensive income.

FOREIGN CURRENCY TRANSLATION RESERVEThe foreign currency translation reserve covers all exchange differences arising on translation of the financial statements of foreign operations that are presented in a currency other than that used for presentation of the consolidated financial statements. The Parent Company and the Group present their financial statements in EUR.

ACTUARIAL GAINS/LOSSESRefer to Note 25 Pensions.

NOTE 25 PENSION PROVISIONSThe Polygon Group has established pension plans for its employees in the countries where the Group operates. The plans generally conform to local practice in the respective countries and may take the form of defined-contribution or defined-benefit plans. Polygon has defined- benefit plans in Sweden, Germany, France and the UK. The defined- benefit pension plan in Norway was finally terminated in 2015 and was then transferred to defined-contribution plans.

The defined-contribution plans mainly include retirement pensions, disability pensions and survivor pensions. The contributions are paid during the year by the respective Group company to separate legal entities, for example, insurance companies. The Group has no further obligations once the contributions have been paid.

The defined-benefit pension plans mainly encompass employees in Sweden, but also employees in France. In the other countries, the defined-benefit plans are closed and no new vesting is made. All pension plans are based on final salary, and provide benefits in the form of a guaranteed level of pension payments, usually as a %age of final salary, to the plan participants during their entire lifetimes or parts thereof.

The total pension cost for 2018 amounted to EUR 7,061 thousand (6,076), of which EUR 462 thousand (279) pertained to defined-benefit pensions. The pension cost for defined-contribution pensions amounted to EUR 6,392 thousand (5,576), with the increase for 2018 primarily attributable to acquired companies. Expected pension costs for defined-benefit pensions for 2018 amounted to EUR 282 thousand (240). The higher pension cost for defined benefit pension plansfor 2018 is mainly

POLYGON 2018 83

NOTES

due to a ruling in the UK regarding equalization of minimum pensions (see more information below) with a one-time cost in the income statement of TGBP 156. The total IAS19 net debt has increased with 200 TEUR in 2018. The increase includes the acquisition of three companies in France end of 2017 which provided EUR 95 in debt for defined benefit pension plans.

The pension plan in the UK is funded and also includes a defined-contri-bution component. The pension plan is closed, which means that no new vesting is made. The plan assets are exposed to market risks, among other risks. The ruling in the Lloyd case 26th of October concerning equalisation of guaranteed minimum pensions (GMP) impacted essentially all compa-nies in the UK and resulted in the recognition of a non-recurring cost in profit or loss. In Polygon’s case, an overall assessment indicated a cost of GBP 156 thousand with respect to the recognition of GMP equalisation, corresponding to an estimated increase in defined-benefit pension plans of 5 %, which was recognised in profit or loss for 2018 as a previous service cost under items affecting comparability. As in earlier years, annuities were purchased in small amounts and payments were made to external pension plans. The purchase of annuities is recognised as a settlement in the IAS 19 summary, with a non-recurring cost recognised in profit or loss for 2018, and the others as payments from the plan.

The pension plan in Sweden consists of the collectively agreed ITP plan. This plan includes both defined-contribution and defined-benefit components. The defined-benefit pension obligation is secured through provisions in the balance sheet, combined with credit insurance in PRI Pensionsgaranti. The pension plan exposes the Group to risks such as a change in the discount rate, increased life expectancy, higher inflation and salary increases.

In France and Germany, there are unfunded pension obligations in minor amounts. The present value of these pension plans is mainly impacted by changes in the discount rate. During the year, companies acquired by Polygon France at the end of the preceding year were incorporated in the IAS 19 calculation for defined-benefit pension plans.

The tables below summarise the components of the net pension expense that are recognised in profit or loss and in other comprehensive income as well changes in the value of the defined-benefit pension obligation recognised in the balance sheet.

2018 2017

Summary of provisions in the GroupDefined-benefit pension obligations 5,188 4,988

Defined-benefit liability 5,188 4,988

Pension costs 2018 2017

Amount recognised in profit or loss Cost for service in the current year 327 144

Interest expenses 223 221

Interest income on plan assets –88 –86

Net cost for defined-benefit pensions 462 279

Cost for defined-contribution pensions 6,392 5,576

Amount recognised in other comprehensive incomeRemeasurement of pension obligations 48 329

Remeasurement of plan assets 159 –108

Cost/(revenue) of defined-benefit pensions 207 221 Total pension costs 7,061 6,076

Amount recognised in the balance sheet 2018 2017

Present value of pension obligations, funded plans 3,733 4,189

Fair value of plan assets –3,292 –3,498

Net liability for funded plans 441 691

Present value of pension obligations, unfunded plans 4,747 4,297

Net liability recognised in the balance sheet 5,188 4,988

Change in amount recognised in the balance sheet 2018 2017

Opening balance, net debt 4,988 5,034 Cost for pensions vested during the year 327 144

Net interest expense 135 135

Remeasurement 207 221

Pension payments direct from the employer –164 –170

Payments to plan assets from the employer –231 –233

Acquisitions/divestments 95 –


Closing balance, net debt 5,188 4,988

Change in present value of pension obligations 2018 2017

Closing balance, pension obligations 8,486 8,580 Cost for service in the current year 149 104

Net interest expense 223 221

Settlement –72 –269

Remeasurement of pensions

– adjustment of pension plans 176 –

– demographic assumptions –130 –

– financial assumptions 171 340

– experience-based adjustments 8 –10

Pension payments –387 –209

Acquisitions/divestments 95 –


Closing balance, pension obligations 8,480 8,486

Change in plan assets measured at fair value 2018 2017

Closing balance, plan assets 3,498 3,546 Interest income 88 86

Return in addition to interest income –159 108

Payments from the employer 395 402

Pension payments from plan assets –387 –209

Settlement –74 –310


Closing balance, plan assets 3,292 3,498

Plan assets measured at fair value 2018 2017

Shares 48% 52%

Bonds 21% 29%

Other, including cash and cash equivalents 31% 19%

Total 100% 100%

All plan assets are assets with a quoted market price in an active market. None of the plan assets are invested in the Group’s own equity instru-ments, debt instruments, real estate or other assets that are used by the company.

2018 Pension

obligations Plan assets Net debt

Breakdown by countryUK, funded plan 3,733 3,292 441

Sweden, unfunded plan 4,253 – 4,253

Other countries, unfunded plans 1) 494 – 494

Total 8,480 3,292 5,188

1) France and Germany

Note 25, cont.

POLYGON 201884

NOTES

NOTE 28 CHANGES IN FINANCIAL LIABILITIES Reconciliation of opening and closing balances of financial liabilities and their movement in cash flow are presented in the table below:

1 January 2018 Cash flow

Changes in fair value

Acquisitions

Other changes

31 December 2018

Interest-bearing non-current liabilities 183,389 30,000 –1,942 2,779 559 214,785

Interest-bearing current liabilities 885 – – –885 – –

Accrued expenses 1,900 –1,900 – – 1,866 1,866

Hedging (–asset/+liability) 202 – –202 – – –

Total 186,376 28,100 –2,144 1,895 2,425 216,651

1 January 2017 Cash flow

Changes in fair value

Acquisitions

Other changes

31 December 2017

Interest-bearing non-current liabilities 181,282 –14 1,614 – 507 183,389

Interest-bearing current liabilities – – – 885 – 885

Accrued expenses 1,742 –1,742 – – 1,900 1,900

Hedging (–asset/+liability) –113 – 315 – – 202

Total 182,911 –1,756 1,929 885 2,407 186,376

Other changes include: capitalisation of interest on shareholder loans of EUR 559 (507) thousand and accrued interest on bonds of EUR 1,866 (1,900) thousand.

The most important financial actuarial assumptions that have been used to determine the pension obligations for the Group’s significant pension plans are as follows:

Material actuarial assumptions 2018 2017

UKDiscount rate 2.80% 2.50%

Inflation 2.50% 2.40%

Future salary increases N/A N/A

Future pension increases N/A N/A

SwedenDiscount rate 2.40% 2.75%

Inflation 2.00% 2.00%

Future salary increases 3.00% 3.00%

Future pension increases 2.00% 2.00%

Assumptions about life expectancy are based on official statistics and experience from life expectancy surveys in the respective countries, and are determined after consultation with experts in the actuarial field. The discount rate is determined based on high-quality corporate bonds that are traded in a deep market with consideration given to the duration of the pension obligation. In Sweden, the discount rate is based on the discount rate on covered mortgage-backed bonds.

An increase in the discount rate of 0.5 %age points would reduce the pension obligation by EUR 751 thousand, corresponding to a debt reduc-tion of 8.9%. A decrease in the discount rate of 0.5 %age points would increase the pension obligation by EUR 857 thousand, corresponding to a debt increase of 10.1%.

An increase in inflation of 0.5 %age points would increase the pension obligation by EUR 549 thousand, corresponding to a debt increase of 6.7%. An decrease in inflation of 0.5 %age points would reduce the pen-sion obligation by EUR 484 thousand, corresponding to a debt reduction of 5.9%.

The sensitivity analysis is carried out by changing one actuarial assump-tion while the other assumptions remain constant. This method shows the obligation’s sensitivity to an individual assumption. This is a simplified method, since the actuarial assumptions are normally correlated.

The weighted average duration of the pension obligation is approxi-mately 19 years.

The Group’s expected contributions to the defined-benefit pension plans as well as pension payments directly from the employer for the next annual reporting period amount to EUR 331 thousand.

NOTE 26 ACCRUED EXPENSES AND DEFERRED INCOME

2018 2017

Accrued salary-related expenses 12,110 10,305

Accrued holiday pay 9,846 8,811

Accrued invoices not paid 4,542 4,797

Accrued interest expenses 1,866 1,900

Accrued expenses for customer contracts 5,243 6,414

Other accrued expenses and deferred income 5,073 4,456

Total 38,680 36,683

NOTE 27 CONTINGENT LIABILITIESThe Group has no contingent liabilities.

POLYGON 2018 85

NOTES

NOTE 30 RECONCILING ITEMS BETWEEN PROFIT BEFORE TAX AND NET CASH FLOW

2018 2017

Non-cash items:

Amortisation and impairment of intangible assets 8,725 5,368

Depreciation of property, plant and equipment 11,259 9,294

Negative goodwill 658 –3,992

Divestments/disposals of non-current assets 1,239 420

Change in provisions and other 2,031 –2,118

Total 23,912 8,972

NOTE 29 RELATED PARTY TRANSACTIONS AND LIST OF GROUP COMPANIESThe Group is under the controlling influence of Polygon Holding AB, the Parent Company of Polygon AB. As of 31 December, 83.83 % of Polygon Holding AB, domiciled in Stockholm (556809-3511), was owned by MuHa LuxCo S.á.r.l, and the company was under the controlling influence of Triton Fund III. Polygon Holding AB is the highest level at which consol-idated financial statements are prepared. The ultimate Parent Company of the Group is MuHa LuxCo S.à.r.l., corporate identity number B154023 and domiciled in Luxembourg, which is exempt from the requirement to prepare consolidated financial statements. MuHa LuxCo S.á.r.l is under the controlling influence of Triton Fund III, which, under the regulations in Luxembourg, is not required to prepare consolidated financial state-ments. As shown in Note 18 Interest-bearing loans and borrowings, the Group has loans from Triton of EUR 6.2 million (5.6). During the year, EUR 633 thousand (263) was paid to West Park Management Services

Ltd and Triton Partners Ltd as compensation for services rendered and outlays.

As in the preceding year, no Group contributions or dividends were paid to Polygon Holding AB during the current year.

Transactions between subsidiaries were not material during 2018 and 2017.

For information concerning remuneration to senior executives and the Board of Directors, see Note 8.

POLYGONVATRO GmbH is included as a German subsidiary in the consolidated financial statements of Polygon AB and, as a result, makes use of the exemption provision of section 264 (3) HGB (German Commercial Code).

GROUP SUBSIDIARIES

SubsidiaryCountry of establishment Corp. ID No. No. of shares

Participating interest, % Carrying amount

Company name Polygon International AB Sweden 556807-6417 50,100 100.0 183,859

Polygon A/S Denmark 42 93 83 19 470,000 66.4 20,755

Dansk Bygningskontroll A/S Denmark 31859883 27 100.0 30,783

Polygon Norway Holding AS Norway 996019381 335,500 100.0 6,832

Polygon AS Norway 915229115 3,450 100.0 12,576

Skadegruppen AS Norway 943578524 31,000 100.0 –1,847

Polygon Nederland Holding BV Netherlands 51345706 40 100.0 5,222

Polygon Nederland BV Netherlands 28030503 40 100.0 16,100

Polygon Belgium NV Belgium 440188077 1,250 100.0 485

Polygon Sverige AB Sweden 556034-6164 2,100 100.0 89,121

AK-Konsult Indoor Air AB Sweden 556394-3249 4,000 100.0 1,698

Refix Skadesanering AB Sweden 556858-0335 27,000 100.0 921

PolygonVatro GmbH Germany HRB 10 713 1 100.0 81,279

VDL Verwaltungs GmbH Germany HRB 21685 1 100.0 5,587

Polygon Austria Service GmbH Austria FN 115034v 75,000 100.0 111

Polygon Restoration Inc Canada 103804811 81 100.0 2,415

Lora Construction Inc Canada 863300307 20,000 100.0 207

9237-2556 Quebec Inc Canada 815014006 200 100.0 8

Polygon France SAS France 341 019 180 100 100.0 2,766

Polygon Service Pte Ltd Singapore 201012990Z 1,317 100.0 1,788

Polygon UK Holding Ltd UK 7452971 2 100.0 1,632

R3 Polygon UK Ltd UK 00402652 250,000 100.0 7,531

Harwell Technical Services Ltd UK 3064821 10,000 100.0 2,611

Neways Associates Ltd UK 4373558 90 100.0 5,121

Polygon US Corporation USA 27-2892115 1,000 100.0 –

Polygon Finland Holding Oy Finland 2354769-0 2,500 100.0 2,043

Polygon Finland Oy Finland 0892371-5 50,000 100.0 18,895

POLYGON 201886

NOTES

NOTE 32 FIVE-YEAR OVERVIEW2014 2015 2016 2017 2018

Sales revenue and profit/lossSales revenue 419,106 438,740 485,282 512,429 619,264

Operating profit/loss –1,097 6,975 25,102 25,438 25,331

Net financial items –11,525 –6,812 –12,385 –16,946 –14,595

Profit/loss after financial items –12,622 163 12,717 8,492 10,736

Tax expense 2,100 41 –2,274 –3,024 –4,233

Profit/loss for the year –10,522 204 10,443 5,468 6,503

Financial positionGoodwill 102,588 104,865 104,181 110,942 137,126

Other intangible assets 53,772 47,523 45,561 41,960 53,329

Property, plant and equipment 27,103 27,233 33,251 40,200 46,101

Financial assets 22,777 22,282 23,424 16,744 14,316

Contract assets 16,498 17,508 29,613 28,246 44,730

Current receivables 74,530 71,288 78,425 84,588 98,284

Cash 21,509 26,529 36,585 42,541 33,192

Total assets 318,777 317,228 351,040 365,221 427,078

Equity 42,445 42,257 53,373 59,754 75,491

Provisions 29,774 26,719 27,009 21,362 25,085

Non-current liabilities 175,397 175,812 181,282 184,208 214,785

Current liabilities 71,161 72,440 89,376 99,897 111,717

Total equity and liabilities 318,777 317,228 351,040 365,221 427,078

Performance measures EBITDA 13,442 21,843 39,639 40,100 45,316

EBITA 4,651 12,478 30,291 30,114 31,910

Adjusted EBITA 11,781 20,028 32,052 33,022 39,630

Adjusted EBITA, % 2.8 4.6 6.6 6.4 6.4

Net debt 101,761 96,248 144,647 141,946 180,629

Full-time employees as of the balance sheet date 2,840 2,765 2,909 3,279 3,810

IFRS 15 Revenue from Contracts with Customers is applied as of 2018 and the comparative figures from 2017 have been restated in accordance with the new standard.

NOTE 31 SIGNIFICANT EVENTS AFTER THE END OF THE FINANCIAL YEAR

ACQUISITIONS 2019In January 2019, Polygon Nederland BV acquired the companies Tiedema Lekdetectie BV and Teidema Droogtechniek BV and the acquisitions were closed immediately. The acquisitions strengthened Polygon’s position in leak detection and temporary climate solutions in the Netherlands. The companies have sales of EUR 1.3 million and 12 employees.

On 1 March 2019, Polygon International AB acquired the Alvisa 24 Group in Switzerland and the acquisition was closed immediately. The acquisition enabled Polygon to expand its operations to include an additional country in Europe, creating new opportunities for cooperation and efficiency enhancement. The group has sales of EUR 11 million and 67 employees.

The table below shows the aforementioned acquisitions and all information is preliminary.

Fair value recognised on acquisition 2019

Customer relationships 1,574

Trademarks 394

Acquired order backlog 52

Equipment 1,072

Other non-current receivables 100

Inventory 1,632

Current receivables 991

Total identifiable assets at fair value 5,815

Long-term loans and other liabilities 1,223

Current liabilities 596

Less: Cash and cash equivalents –527

Total identifiable liabilites less cash at fair value 1,292

Fair value recognised on acquisition 2019

Total identifiable net assets at fair value 4,523Goodwill 2,477

Purchase consideration transferred 7,000

Purchase consideration Cash paid 7,000

Total consideration 7,000

Analysis of cash flows on acquisition: Net cash acquired with the subsidiary –527

Cash paid 7,000

Closing balance 6,473

POLYGON 2018 87

NOTES

NOTE 34 DEFINITIONSSales revenue Sales revenue excluding VAT and discounts

Gross profit Sales revenue less cost of services sold

EBITDA Earnings before interest, tax, depreciation of property, plant and equipment and amortisation of intangible assets

Adjusted EBITDA Earnings before interest, tax, depreciation of property, plant and equipment, amortisation of intangible assets and items affecting comparability

EBITA Earnings before interest, tax, depreciation of the surplus value of property, plant and equipment and amortisation of the surplus value of intangible assets in connection with acquisitions

Adjusted EBITA Earnings before interest, tax, depreciation of the surplus value of property, plant and equipment, amortisation of the surplus value of intangible assets in connection with acquisitions and items affecting comparability

EBIT Earnings before interest and tax

EBIT margin Earnings before interest and tax as a %age of sales revenue

EBITDA margin, Adjusted EBITDA margin, EBITA margin andadjusted EBITA margin

EBITDA, Adjusted EBITDA, EBITA and Adjusted EBITA as a %age of sales revenue

Net financial items Financial income less financial expenses including exchange differences related to financial assets and liabilities

Net debt Interest-bearing debt (including pension and lease liabilities) less cash and bank balances

Earnings per share Profit/loss for the year attributable to Parent Company shareholders divided by the average number of shares for the year

Items affecting comparability Items attributable to capital gains/losses, impairment, restructuring, redundancy costs and other similar material income and expenses

Capital expenditures Resources used to acquire intangible assets and property, plant and equipment

Organic growth Growth generated by existing operations excluding the impact of foreign exchange

Adjusted organic growth Growth generated by existing operations excluding the impact of foreign exchange and adjusted for comparable operations

Rolling 12 months The last 12 months

Polygon presents certain financial performance measures that are not defined in accordance with IFRS. Polygon believes that these perfor-mance measures provide useful supplementary information for investors and company management to enable an assessment of trends and the company’s performance. Since not all companies calculate financial

performance measures in the same manner, these performance measures are not always comparable with those used by other companies. The performance measures used are not to be seen as a replacement for the performance measures defined in accordance with IFRS but rather as a complement.

NOTE 33 ALTERNATIVE PERFORMANCE MEASURESEUR thousand 2018 2017

Adjusted EBITDA Operating profit (EBIT) 25,331 25,438 Reversal of amortisation of surplus value of intangible assets in connection with acquisitions 6,579 4,676

EBITA 31,910 30,114

Reversal of depreciation of property, plant and equipment and amortisation of intangible assets 13,406 9,986

EBITDA 45,316 40,100

Reversal of items affecting comparability 7,720 2,908

Adjusted EBITDA 53,036 43,008

Adjusted EBITA

Operating profit (EBIT) 25,331 25,438 Reversal of amortisation of surplus value of intangible assets in connection with acquisitions 6,579 4,676

EBITA 31,910 30,114

Reversal of items affecting comparability 7,720 2,908

Adjusted EBITA 39,630 33,022

Net debt

Provision for pensions and similar obligations 5,188 4,988

Non-current financial liabilities, interest-bearing 205,854 178,614

Finance leases and non-current loans, interest-bearing 2,779 885

Cash and bank balances –33,192 –42,541

Net debt 180,629 141,946

POLYGON 201888

NOTES

PARENT COMPANY FINANCIAL STATEMENTS

PARENT COMPANY INCOME STATEMENT

PARENT COMPANY STATEMENT OF OTHER COMPREHENSIVE INCOME


Net sales 2 3,752 3,533 Total sales 3,752 3,533

Selling and administrative expenses 3, 4 –3,561 –3,280 Other operating expenses 5 –911 –176 Operating profit/loss –720 77

Interest income and similar profit/loss items 6 2,964 3,573 Interest expenses and similar profit/loss items 6 –14,004 –11,775 Loss after financial items –11,760 –8,125

Appropriations 7 7,070 680 Loss before tax –4,690 –7,445

Tax expense 8 536 478 Loss for the year –4,154 –6,967


Loss for the year –4,154 –6,967 Comprehensive income for the year –4,154 –6,967

POLYGON 2018 89


PARENT COMPANY BALANCE SHEETEUR thousand Note 2018 2017

ASSETS Non-current assets Financial assets Participations in Group companies 9, 13 185,902 185,902 Deferred tax receivables 8 1,782 812 Receivables from subsidiaries, interest-bearing 10 64,603 64,283 Total non-current assets 252,287 250,997

Current assets Current receivables Receivables from Group companies 604 308 Other current receivables 245 87 Prepaid expenses 15 14 Receivables from subsidiaries 52,114 28,007 Total current receivables 52,978 28,416 Total current assets 52,978 28,416 TOTAL ASSETS 305,265 279,413

EQUITY AND LIABILITIES EquityRestricted equity Share capital (5,600 shares with a quotient value of EUR 10.27) 58 58 Non-restricted equity Share premium reserve 6,771 6,771 Retained earnings 86,565 90,719 Total non-restricted equity 93,336 97,490 Total equity 93,394 97,548

Non-current liabilities Other provisions 150 – Deferred tax liabilities 936 502 Non-current financial liabilities, interest-bearing 11 206,378 177,796 Total non-current liabilities 207,464 178,298

Current liabilities Accounts payables 889 53 Liabilities to subsidiaries 53 – Other current liabilities 569 290 Accrued expenses 12 2,896 3,224 Total current liabilities 4,407 3,567 TOTAL EQUITY AND LIABILITIES 305,265 279,413

POLYGON 201890


PARENT COMPANY STATEMENT OF CASH FLOWS

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

EUR thousand Share capitalShare premium

reserveRetained earnings

Total equity

Closing balance, 31 December 2016 58 6,771 97,686 104,515 Profit/loss for the year – – –6,967 –6,967 Closing balance, 31 December 2017 58 6,771 90,719 97,548 Profit/loss for the year – – –4,154 –4,154 Closing balance, 31 December 2018 58 6,771 86,565 93,394


Operating activities Operating profit/loss –720 77 Non-cash items not included in operating profit 14 6,442 –260 Income tax paid – –42 Net cash flow from operating activities before changes in working capital 5,722 –225

Changes in working capital Change in current receivables and liabilities to Group companies –6,866 –188Change in other receivables –159 128Change in other liabilities 787 –57 Net cash flow from operating activities –516 –342

Cash flow from financing activities Borrowings 210,000 1,589 Repayment of borrowings –181,418 – Change in receivables from Group companies –320 179Group contributions 680 3,300 Financial income received 2,964 3,573 Financial expenses paid –13,226 –10,835 Cash flow from financing activities 18,680 –2,194

Cash flow for the year 18,164 –2,536 Cash and bank balances at the beginning of the year 26,182 28,718 Cash and bank balances at the end of the year 44,346 26,182

POLYGON 2018 91


NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

NOTE 1 BASIS OF PRESENTATIONRULES AND REGULATIONS APPLIEDIn addition to the Group’s accounting policies, the financial statements of the Parent Company have been prepared in accordance with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board’s rec-ommendation RFR 2 Accounting for Legal Entities. This means that IFRS is applied with the exception of the additions presented below.

The Parent Company’s bank balances are not recognised as cash since they are part of the Group’s cash pool. However, the bank balances are presented as cash in the statement of cash flows.

IFRS 9Due to the relationship between accounting and taxation, the rules concerning financial instruments under IFRS 9 are not applied in the Parent Company as a legal entity. Instead, the Parent Company applies the acquisition method in accordance with the Swedish Annual Accounts Act. Accordingly, the Parent Company measures non-current financial assets at cost and current financial assets at the lower of cost or net realisable value, applying the rules for impairment of expected credit losses in accordance with IFRS 9 with respect to assets that are debt instruments. For other financial assets, impairment is based on market value.

The Parent Company applies the exemption option not to measure financial guarantee contracts that benefit subsidiaries, associated compa-nies and joint ventures in accordance with the rules of IFRS 9, but rather applies the measurement principles in IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

PARTICIPATING INTERESTS IN SUBSIDIARIESIn the Parent Company, participating interests in subsidiaries are rec-ognised in accordance with the cost method. All dividends are recognised in the Parent Company’s profit or loss.

GROUP CONTRIBUTIONS AND SHAREHOLDER CONTRIBUTIONSShareholder contributions are recognised directly in equity by the recipient and are capitalised in shares and participations by the renderer insofar as impairment is not required. Group contributions received and paid are recognised in profit or loss as appropriations in accordance with RFR 2.

NOTE 2 BREAKDOWN OF SALESPolygon AB had no external sales in the period. All revenue is inter-com-pany. No purchases were made from other Group companies during the year.

NOTE 3 SALARIES, EMPLOYEE BENEFITS AND OTHER FEES

Of the Group’s senior executives, the CEO, CFO, CCO and COO are employed by the Parent Company.

The average number of employees in the Parent Company was four (three).

Remuneration to these individuals (including salaries, social security expenses, pensions and similar) and significant terms of employment are described in Note 8 Salaries, social security expenses and employee benefits (notes to the consolidated financial statements).

NOTE 4 AUDIT FEES2018 2017

Audit assignment (EY) 37 50

Other assignments (EY) 17 12

Total 54 62

Audit assignment refers to auditing of the annual report and financial accounts and the administration by the Board as well as other audit tasks that are incumbent upon the company’s auditors.

NOTE 5 OTHER OPERATING EXPENSES2018 2017

Transaction costs in connection with acquisitions – 7

Exchange gains/losses 43 9

Compensation to former CEO 868 –

Other expenses – 160

Total 911 176

NOTE 6 INTEREST INCOME AND INTEREST EXPENSES

2018 2017

Interest income and similar items

Interest income, internal 2,964 3,573

Total 2,964 3,573

Interest expenses and similar items

Interest expenses, external –8,765 –9,123

Exchange differences on loans –932 –944

Other financial expenses –4,307 –1,708

Total –14,004 –11,775 Net financial items –11,040 –8,202

NOTE 7 APPROPRIATIONS2018 2017

Group contributions received 7,070 680

Total 7,070 680

POLYGON 201892


NOTE 9 PARTICIPATIONS IN GROUP COMPANIES

Participations in Group companiesCountry of establishment Corp. ID No. No. of shares

Participating interest 2018 2017

Polygon International AB Sweden 556807-6417 50,100 100.0% 183,859 183,859

Polygon Finland Holding Oy Finland 2354769-0 2,500 100.0% 2,043 2,043


2018 2017



Indirect holdings and the Group structure are described in Note 29 Related party transactions (notes to the consolidated financial statements).

NOTE 8 TAX2018 2017

Loss before tax –4,690 –7,445 Tax according to the applicable tax rate for the Parent Company, 22% 1,032 1,638

Tax pertaining to preceding year

Non-deductible expenses –13 –14

Capitalisation of loss carryforwards – –812

Effect of changed tax rate –35 –

Deferred tax on temporary differences not reflected in profit or loss –448 –323

Other – –11

Total tax expense 536 478

Polygon AB has accumulated tax losses of 14 108 (7 382) TEUR 31 decem-ber 2018 with no expiry date. 8 324 (3 691) TEUR has been booked as a deferred tax asset 31 December 2018 with a book value of 1 782 (812) TEUR.

NOTE 10 NON-CURRENT RECEIVABLES FROM GROUP COMPANIES

2018 2017

Polygon AS – 419

Polygon Holding Finland OY 15,619 14,967

Polygon Nederland Holding BV 5,502 5,502

Polygon Norway Holding AS 9,937 10,130

Polygon Restoration Inc 802 933

PolygonVatro GmbH 32,332 32,332

Polygon International AB 411 –

Total 64,603 64,283

NOTE 11 NON-CURRENT FINANCIAL LIABILITIES

2018 2017

Bond 210,000 180,000

Financing costs1) –3,622 –2,204

Total 206,378 177,796

1) Financing costs are allocated over the duration of the loan.

POLYGON 2018 93


NOTE 12 ACCRUED EXPENSES AND DEFERRED INCOME

2018 2017

Accrued interest expenses 1,866 1,900

Employee-related costs 757 1,233

Other accrued expenses 273 91

Total 2,896 3,224

NOTE 13 PLEDGED ASSETSAll shares in the Group’s major subsidiaries and some of the Group’s internal loans are pledged as collateral for the Group’s bond. The amounts presented in Note 21 Pledged assets for own liabilities and provisions (notes to the consolidated financial statements) correspond to the total net assets in the pledged subsidiaries. The table below shows the carrying amount of the Parent Company’s subsidiaries that are included in the Group’s pledged assets.

2018 2017

Pledged assets Shares in subsidiaries 185,902 185,902

Total pledged assets 185,902 185,902 Contingent liabilities None None

NOTE 14 RECONCILING ITEMS BETWEEN PROFIT BEFORE TAX AND NET CASH FLOW

2018 2017

Non-cash items:

Group contributions, not paid 7,070 680

Exchange differences, unrealised –778 –940

Changes in provisions 150 –

Total 6,442 –260

NOTE 15 RELATED PARTY TRANSACTIONS

The company is under the controlling influence of Polygon Holding AB, the Parent Company of Polygon AB. As of 31 December 2018, 83.83% of Polygon Holding AB, domiciled in Stockholm (556809-3511), was owned by Muha LuxCo S.á.r.l, and the company was under the controlling influence of Triton Fund III. There have been no material transactions with companies in which Triton Fund III has a significant or controlling influence. During the year, EUR 633 thousand (263) was paid to West Park Management Services Ltd and Triton Partners Ltd as compensation for services rendered and outlays.

Group contributions of EUR 7.1 million (0.7) were received from the subsidiary Polygon International AB.

As in the preceding year, no Group contributions or shareholder contri-butions were received from Polygon Holding AB during the current year.

NOTE 16 PROPOSED APPROPRIATION OF EARNINGS

PROPOSED APPROPRIATION OF EARNINGSProposed appropriation of the Parent Company’s earnings:The Board of Directors and the CEO propose that the loss for the year of EUR 4,154,822, together with retained earnings of EUR 97,490,955, amounting to a total of EUR 93,336,133, be carried forward.

NOTE 17 SIGNIFICANT EVENTS AFTER THE END OF THE FINANCIAL YEAR

On 1 March 2019, Polygon International AB acquired the Alvisa 24 Group in Switzerland and the acquisition was closed immediately. The acquisition enabled Polygon to expand its operations to include an addi-tional country in Europe, creating new opportunities for cooperation and efficiency enhancement. The group has sales of EUR 11 million and 67 employees.

POLYGON 201894


SIGNATURES OF THE BOARD OF DIRECTORS AND THE CEO

The Board of Directors and the CEO hereby certify that the annual accounts were prepared in accordance with generally accepted accounting standards in Sweden, and that the consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRS) as defined in regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards, and provide a fair presentation of the Group and the Parent Company’s financial position and earnings. The Board of Directors and the CEO also certify that the statutory administration report provides a fair presentation of the Group’s and the Parent Company’s opera-tions, financial position and earnings and describes the material risks and uncertainties facing the Parent Company and the companies included in the Group.

Stockholm, 2 April 2019

Nadia Meier-KirnerBoard Chairman

Petter DarinBoard member

Gunilla AnderssonBoard member

Jonas SamuelsonBoard member

Lars BleckoBoard member

Axel GränitzPresident & CEO

Our audit report concerning this annual report was submitted on 4 April 2019 Ernst & Young AB

Staffan LandénAuthorised Public Accountant

POLYGON 2018 95

SIGNATURES OF THE BOARD OF DIRECTORS AND THE CEO

AUDITOR’S REPORT

REPORT ON THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTSOpinionsWe have audited the annual accounts and consolidated accounts of Polygon AB (publ) except for the corporate governance statement on pages 57–61 for the year 2018. The annual accounts and consolidated accounts of the company are included on pages 54–95 in this document.

In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the parent company as of 31 December 2018 and its financial perfor-mance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2018 and their financial performance and cash flow for the year then ended in accordance with International Financial Reporting Stan-dards (IFRS), as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the corporate governance statement on pages 57–61. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.

We therefore recommend that the general meeting of

shareholders adopts the income statement and balance sheet for the parent company and the group.

Our opinions in this report on the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company’s audit committee in accordance with the Audit Regulation (537/2014) Article 11.

Basis for OpinionsWe conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those stan-dards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsi-bilities in accordance with these requirements. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU with the exception of a very limited service reported to the Audit Committee.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

KEY AUDIT MATTERSKey audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial state-ments section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial state-ments.

To the general meeting of the shareholders of Polygon AB (publ), corporate identity number 556816-5855

POLYGON 201896

AUDITOR'S REPORT

OTHER INFORMATION THAN THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTSThis document also contains other information than the annual accounts and consolidated accounts and is found on pages 1–51. The Board of Directors and the Managing Director are responsible for this other information.

Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.

In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the infor-mation identified above and consider whether the informa-tion is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.

If we, based on the work performed concerning this infor-mation, conclude that there is a material misstatement of

this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and the Managing DirectorThe Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.

In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company’s and the group’s ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the

REVENUE RECOGNITION

Description How our audit addressed this key audit matter

Sales of services for 2018 amounts to EUR 619.3 million. The policies for revenue recognition is stated in note 2.4. Revenue is recognized when the control has passed to the customer by the customer being able to use or benefit from the good or service, at which point it is deemed to have been transferred. Control may be passed at a given point in time or over time. Revenue shall consist of the amount that the Company expects to receive in exchange for the delivered goods or services.

Based on that the revenue recognition involves assess-ments made by the company it is our assessment that reve-nue recognition is a key audit matter in the audit.

In our audit we have, among other things, performed analyti-cal review, audit of agreements and tested samples of the revenue allocation at the year end closing to assess the correctness of the revenue recognition. We have specifically focused on auditing larger and complex agreements.

We have audited the process for collection of accounts receivable and assessment of doubtful receivables. We have also performed audit procedures on the company’s assess-ment of contracts with low or negative income and assessed whether the information disclosed in the annual report is appropriate.

VALUATION OF GOODWILL AND TRADEMARK

Description How our audit addressed this key audit matter

In the Group’s balance sheet as per December 31, 2018 the reported value of Goodwill and Trademarks amounts to EUR 163.4 million, which equals 38 % of the Group’s total assets. As described in note 2.4 the company prepares annually, or as soon there is an indication that there is an impairment need, an impairment test. Goodwill is allocated to cash gen-erating units and in if the book value exceeds the recoverable amount, the asset is impaired to its recoverable amount. The recoverable amount is determined by calculating the value in use and in note 2.4 it is stated that when making this calcula-tion assessment of the future profit and loss is made. In note 13 it is stated that the assessment of the value in use is based on the group’s five-year business plan and an assessed 2 % annual growth rate thereafter for the cash generating units. When determining important assumptions the company uses both historical experiences as well as assessments of the future. In 2018 no need for impairment has been identified. Based on the assumptions used in the calculation of the value in use we have assessed the valuation of goodwill and trade-mark as a key audit matter in the audit.

In our audit we have evaluated the Company’s process to develop and perform impairment tests. We have examined how cash-generating units, based on established criteria’s, are identified and compared to how the Company inter-nally monitors its business. We have assessed the valuation and calculation methods used by the company and made comparisons with historical results and the accuracy in previous forecasts.

We have also involved valuation specialists to assist us in the assessment of reasonableness in used assumptions, sensitivity analysis of changed assumptions, and the rea-sonableness of the discount rate and the long them growth rate. We have also assessed whether the informa-tion disclosed in the annual report is appropriate.

POLYGON 2018 97

AUDITOR'S REPORT

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS OpinionsIn addition to our audit of the annual accounts and con-solidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Polygon AB (publ) for the year 2018 and the proposed appropriations of the company’s profit or loss.

We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.

Basis for opinionsWe conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these require-ments.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intends to liquidate the company, to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilityOur objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstate-ment when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of

the annual accounts and consolidated accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of the company’s internal control relevant to our audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors and the Managing Director.

• Conclude on the appropriateness of the Board of Direc-tors’ and the Managing Director’s use of the going con-cern basis of accounting in preparing the annual accounts

and consolidated accounts. We also draw a conclusion, based on the audit evidence obtained, as to whether any material uncertainty exists related to events or conditions that may cast significant doubt on the company’s and the group’s ability to continue as a going concern. If we con-clude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclo-sures in the annual accounts and consolidated accounts or, if such disclosures are inadequate, to modify our opinion about the annual accounts and consolidated accounts. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company and a group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the annual accounts and consolidated accounts, including the disclosures, and whether the annual accounts and con-solidated accounts represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activi-ties within the group to express an opinion on the consoli-dated accounts. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our opinions.

We must inform the Board of Directors of, among other matters, the planned scope and timing of the audit. We must also inform of significant audit findings during our audit, including any significant deficiencies in internal control that we identified.

We must also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the annual accounts and consolidated accounts, including the most important assessed risks for material misstatement, and are therefore the key audit matters. We describe these matters in the auditor’s report unless law or regulation precludes disclosure about the matter.

POLYGON 201898

AUDITOR'S REPORT

Responsibilities of the Board of Directors and the Managing DirectorThe Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss. At the pro-posal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company’s and the group’s type of operations, size and risks place on the size of the parent company’s and the group’s equity, consolidation requirements, liquidity and position in general.

The Board of Directors is responsible for the company’s organization and the administration of the company’s affairs. This includes among other things continuous assessment of the company’s and the group’s financial situation and ensuring that the company’s organization is designed so that the accounting, management of assets and the company’s financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors’ guidelines and instructions and among other matters take measures that are necessary to fulfill the company’s accounting in accordance with law and handle the manage-ment of assets in a reassuring manner.

Auditor’s responsibilityOur objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:• has undertaken any action or been guilty of any omission

which can give rise to liability to the company, or• in any other way has acted in contravention of the

Companies Act, the Annual Accounts Act or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of the company’s profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s profit or loss are not in accordance with the Companies Act.

As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judg-ment and maintain professional skepticism throughout the audit. The examination of the administration and the pro-posed appropriations of the company’s profit or loss is based primarily on the audit of the accounts. Additional audit pro-cedures performed are based on our professional judgment with starting point in risk and materiality. This means that we focus the examination on such actions, areas and relation-ships that are material for the operations and where devia-tions and violations would have particular importance for the company’s situation. We examine and test decisions under-

taken, support for decisions, actions taken and other circum-stances that are relevant to our opinion concerning dis-charge from liability. As a basis for our opinion on the Board of Directors’ proposed appropriations of the company’s profit or loss we examined whether the proposal is in accor-dance with the Companies Act.

The auditor’s examination of the corporate governance statementThe Board of Directors is responsible for that the corporate governance statement on pages 57–61 has been prepared in accordance with the Annual Accounts Act.

Our examination of the corporate governance statement is conducted in accordance with FAR´s auditing standard RevU 16 The auditor´s examination of the corporate gover-nance statement. This means that our examination of the corporate governance statement is different and substan-tially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinions.

A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 2-6 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act.

Ernst & Young AB, Jakobsbergsgatan 24, 111 44 Stockholm, was appointed auditor of Polygon AB (publ) by the general meeting of the shareholders on the 30 April 2018 and has been the company’s auditor since the 7 February 2011.

Stockholm, 4 April 2019Ernst & Young AB

Staffan LandénAuthorized Public Accountant

POLYGON 2018 99

AUDITOR'S REPORT

OFFICES

HEAD OFFICEPolygon ABSveavägen 9, 3rd floor | SE-111 57 Stockholm, [email protected] www.polygongroup.com

BELGIUMMoerelei 127, B-2610 Wilrijk, BelgiumTel: +32 3 451 35 [email protected]/be (Flemish)www.polygongroup.com/be-fr/ (French)

DENMARKStamholmen 193B, 2650 Hvidovre, DenmarkTel: +45 72 28 28 18www.polygongroup.com/dk

FINLANDLyhtytie 22, 00741 Helsinki, FinlandTel: +358 20 7484 [email protected]/fi

FRANCECarré d’Ivry, Bâtiment H, 26, rue Robert Witchitz, 94200 Ivry-sur-Seine, FranceTel: +33 1 46 81 87 [email protected]/fr

CANADA4565 Metropolitain Est, Montréal Qc H1R 1Z4, CanadaTel: +1 514 326 [email protected]/cawww.polygongroup.com/ca-en/

NETHERLANDSJ. Keplerweg 4, 2408 AC Alphen aan den Rijn, NetherlandsTel: +31 (0) 88 500 35 [email protected]/nl

NORWAYEnebakkveien 307, N-1188, Oslo, NorwayTel: +47 22 28 31 [email protected]/no

SINGAPORE48 Mactaggart Road, #07-02 MAE Industrial Building, Singapore 368088Tel: +65 6744 [email protected]/sg

UKBlackstone Road, Huntingdon, Cambridgeshire, PE29 6EE, UKTel: +44 1480 [email protected]/uk

SWEDENHemvärnsgatan 15 (Box 1227), 171 23 Solna, SwedenTel: +46 8 750 33 [email protected]/se

GERMANYRaiffeisenstraße 25, 57462 Olpe, GermanyTel: +49 2761 [email protected]/de

USA15 Sharpner’s Pond Road, Building F, North Andover, MA 01845, USATel: +1 800 422 [email protected]/us

AUSTRIAIZ-NÖ-Süd, Ricoweg – Objekt M37, 2351 Wr. Neudorf, AustriaTel: +43 50 6142 [email protected]/at

Production: Hallvarsson & Halvarsson in cooperation with Polygon. Translation: The Bugli Company. Photography: Peter Hoelstad and others. Printing: Larsson Offsettryck, April 2019.

Polygon ABSveavägen 9, 3rd floor | SE-111 57 Stockholm, [email protected] www.polygongroup.com

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